On Tuesday (July 2), Bitcoin fell back to $62,886. The SEC sued Consensys for unregistered activities of MetaMask and also sued the bank affiliated with the bankrupt exchange FTX. However, two rulings of the U.S. Supreme Court came, clearly limiting the excessive regulation of the SEC. BlackRock is buying Bitcoin on dips, and the signal of bull market recovery is flashing.

SEC sues ConsenSys, FTX-affiliated banks

The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Consensys in the federal court in Brooklyn, New York last Friday, accusing its flagship digital wallet MetaMask of violating securities laws. According to the regulator, Consensys' MetaMask acted as an unregistered broker-dealer and engaged in the offering and sale of securities assets.

The court documents stated that Consensys failed to register as a broker and failed to register the offering and sale of certain securities, violating federal securities laws. In response, Consensys said that the SEC's legal battle against MetaMask was highly anticipated. However, Consensys condemned the SEC for exceeding its jurisdiction because the agency had no authority to regulate software interfaces such as MetaMask.

ConsenSys noted that it will continue to actively seek a ruling on these issues in Texas "because it is important not only to our company, but also to the future success of Web3."

The adoption process of digital assets and Web3 products is at a new stage, involving institutional investors and nation-states. Therefore, the crypto industry will have a significant impact on the upcoming US election.

In addition to Consensys’ MetaMask wallet, the SEC has filed a lawsuit against Silvergate Capital Corporation, the parent company of a crypto-friendly bank that allegedly helped the bankrupt exchange FTX to commit fraud.

In a July 1 filing with the U.S. District Court for the Southern District of New York, the SEC accused Silvergate’s former CEO Alan Lane and former chief risk officer Kathleen Fraher of misleading investors about the strength of its Bank Secrecy Act and anti-money laundering compliance programs, as well as its monitoring of crypto clients like FTX.

The regulator also charged Antonio Martino, Silvergate’s former chief financial officer, with misleading investors about the company’s expected losses on securities sales following the collapse of FTX. All parties except Martino agreed to settle with the SEC.

“The SEC’s allegations are baseless and irresponsible, and I look forward to presenting my case in court and clearing my name,” Martino said, according to a statement from his law firm Linklaters.

According to Gurbir Grewal, the SEC's director of enforcement, Silvergate allegedly failed to detect nearly $9 billion in suspicious transfers between FTX and its related entities, causing investors to lose money. He alleged that after FTX collapsed between November 2022 and January 2023, the company and its executives "doubled down" on misleading investors.

The SEC said Silvergate has agreed to pay a $50 million civil penalty without admitting or denying the charges, while Lane and Fraher have agreed to pay $1 million and $250,000, respectively, in a settlement subject to court approval. The SEC's enforcement action is concurrent with Silvergate's settlement agreements with the Board of Governors of the Federal Reserve System and the California Department of Financial Protection and Innovation.

Two key U.S. court rulings limit SEC's cryptocurrency powers

In the past seven days, the United States Supreme Court (SCOTUS) issued two opinions that could have lasting effects on how the SEC handles enforcement actions against companies, including cryptocurrency firms.

In the SEC v. Jarksey case announced on June 27, the court ruled 6-3, with the majority opinion holding that defendants in the SEC's civil securities fraud cases are entitled to a jury trial rather than strictly accepting the decision of an administrative law judge. The court's conservative members said that when interpreting common law fraud under federal securities laws, the court considered "common law fraud principles," seemingly equating the SEC's civil cases involving securities fraud with criminal cases involving fraud.

Following SEC v. Jarksey, the Supreme Court issued its June 28 decision in Loper Bright Enterprises v. Raimondo, overturning the 1984 ruling that established the Chevron deference doctrine. Although the court’s decision did not specifically mention the SEC, it did require lower courts to “exercise independent judgment in determining whether an agency is acting within its statutory authority” rather than deferring to the federal agency’s interpretation of the law.

“This has direct implications for the crypto industry,” Sheila Warren, CEO of the Crypto Innovation Council, told CoinTelegraph. “If the courts have the ability to intervene, then the role and firepower of regulators like the SEC is called into question.”

Warren added: “There is no doubt that the Supreme Court’s decision places clear limits on excessive regulation that has hindered cryptocurrency innovation in America.”

BlackRock is "buying the dip" as signs of a resumption of the Bitcoin bull market flash

The well-known financial blog ZeroHedge quoted Theya Research as reporting that despite the recent 15% drop in Bitcoin prices, Bitcoin spot ETF holdings remained stable, indicating that long-term and institutional investors' holdings are strong.

BlackRock continues to be the strongest buyer of Bitcoin among its clients, and the correlation between Bitcoin and the S&P 500 remains high, meaning that Bitcoin’s bull run could resume as the U.S. stock market continues to strengthen in 2024-2025.

As can be seen in the figure below, the Bitcoin price (orange) moves almost in sync with the total funds under management (AUM, white) of the 10 US Bitcoin spot ETFs, rising and falling with the rise and fall of the Bitcoin price.

Despite the sharp drop in Bitcoin's price, the ETF's Bitcoin holdings have remained flat. The main customers of exchange-traded funds, namely long-term and institutional investors, have remained strong. In the past three weeks, about a week after the withdrawals began, none of the 10 investment vehicles have seen large inflows/outflows, and these people have generally stayed on the sidelines.

The lack of panic selling of Bitcoin, as seen in many short-term market declines, is an encouraging sign for Bitcoin’s maturity as an asset and its long-term stability.

The break in the correlation between Bitcoin’s spot price and its ETF inflows/outflows may be coming to an end, with inflows picking up again, which could be a sign that investors expect Bitcoin’s price to rise again soon.

After weeks of no net inflows/outflows, the BlackRock Bitcoin Spot ETF (IBIT), which manages the largest amount of funds, saw an inflow of 1,368 bitcoins on Friday. The Bitcoin price crash is likely coming to an end, and spot ETF investors are leading the way.

BlackRock has taken over the position of market leader and shows no signs of slowing down. Back in May, their iShares Bitcoin Spot ETF surpassed the former market leader Grayscale’s GBTC to become the largest Bitcoin spot ETF by total assets under management.

Because Grayscale's GBTC management fee is as high as 1.5% and BlackRock's IBIT management fee is only 25 basis points, Grayscale products have been suffering heavy losses, while BlackRock has benefited from its scale and reputation as the world's largest asset management company.

BlackRock has been the single strongest buyer of bitcoin on behalf of its clients, and it has held its ground during the recent price drop and is buying again.

Bitcoin Technical Analysis

CMTrade said that Bitcoin RSI is above 50, MACD is below the signal line and is positive, and the price may retreat.

Moreover, the price is trading below the 20-period moving average at $62,991 but above the 50-period moving average at $62,548.

“$62,040 is our pivot and our preference is to look for $64,770 as long as $62,040 is support.”

“The alternative is below $62,040, with $61,050 and $60,460 expected to be tested.”