On Thursday (September 5), Bitcoin rebounded from a short-term low of $56,000, but faced resistance at the $58,000 level. Many analysts expect Bitcoin to bottom out in the $45,000 to $50,000 range. The Federal Reserve issued a cease-and-desist order to United Texas Bank related to cryptocurrency, and the U.S. SEC accused cryptocurrency consulting firm Galois Capital of custody errors.
Federal Reserve issues cease-and-desist order to United Texas Bank
According to The Block, the Federal Reserve issued a cease and desist order to the cryptocurrency-related United Texas Bank. After an inspection in May 2023, the Federal Reserve found that the bank had "significant deficiencies" in managing crypto customers and risks, especially in anti-money laundering (AML) compliance.
The order requires the bank to strengthen its board’s oversight of bank compliance and customer due diligence.
United Texas Bank has previously worked with the Stellar Foundation and Circle’s USDC. This is the second time in a month that the Fed has taken enforcement action against a crypto-related bank.
US SEC: Cryptocurrency consulting firm Galois Capital "custodial failure"
According to the official website of the U.S. Securities and Exchange Commission (SEC), the U.S. Securities and Exchange Commission today announced a settlement charge against Florida-based Galois Capital Management LLC, a registered investment advisor to a private equity fund that primarily invested in crypto assets, for failing to comply with requirements related to protecting customer assets, including crypto assets offered and sold in the form of securities.
The SEC also found that Galois misled fund investors about the notice period required for redemptions. To settle the SEC's charges, Galois agreed to pay a $225,000 civil penalty, which will be distributed to injured investors in its funds.
The SEC’s order found that Galois Capital violated the custody rules of the Investment Advisers Act by failing to ensure that certain crypto assets held by private funds it advised were held with a qualified custodian beginning in July 2022. According to the order, Galois Capital held certain crypto assets in online trading accounts with crypto asset trading platforms, including FTX Trading Ltd., which were not qualified custodians.
From early November to mid-November 2022, about half of the fund's assets under management were lost due to the collapse of FTX. The SEC's order also found that Galois Capital misled certain investors by telling them that redemptions required at least five business days' notice before the end of the month, while allowing other investors to redeem with less notice.
The SEC’s order finds that Galois Capital violated the Investment Advisers Act. Without admitting or denying the SEC’s findings, Galois Capital consented to an order requiring it to cease and desist from further violations of the Advisers Act, censuring it, and imposing the civil penalties described above.
Galois Capital responded: "We are being investigated by the US SEC for using the unqualified custodian Fireblocks and have developed a redemption strategy for investors."
US CFTC accuses Uniswap of illegal derivatives trading
CoinTelegraph reported that according to an announcement on September 4, the U.S. Commodity Futures Trading Commission (CFTC) accused decentralized exchange (DeX) developer Uniswap Labs of illegally providing leveraged cryptocurrency trading to U.S. retail investors.
The CFTC said Uniswap Labs agreed to settle the charges by paying a $175,000 civil penalty and agreeing to cease violating the Commodity Exchange Act (CEA).
The U.S. CFTC Enforcement Division "will vigorously enforce the CEA as digital asset platforms and the decentralized finance (DeFi) ecosystem develop," CFTC Enforcement Director Ian McGinley said in a statement. "DeFi operators must remain vigilant to ensure that transactions comply with the law."
Summer Mersinger, one of the five CFTC commissioners, expressed opposition to the regulator’s enforcement actions in a Sept. 4 statement, criticizing the agency for “regulating through enforcement.”
“I hope that one day the CFTC will consider rulemaking, or at least provide guidance, to clarify how DeFi protocols can comply with those rules,” Mersinger said. “Unfortunately, today is not that day.”
In addition, Mersinger said Uniswap has stopped trading in specific leveraged tokens that triggered the CFTC action. These tokens include BTC2XFLI, a 2x flexible leverage index token, and ETH2XFLI, a 2x flexible leverage index token, according to the U.S. CFTC’s order on September 4.
The order does not reveal the issuer of the tokens, but they appear to have been created by IndexCoop, a DeFi protocol specializing in leveraged yield strategies.
Bitcoin Technical Analysis
Bitcoin prices are down 22% from their all-time highs, with many analysts expecting the cryptocurrency to bottom out in the $45,000 to $50,000 range.
Bitcoin’s downward trend has led 10x Research analysts to predict prices will drop below $50,000.
10x Research analyst Markus Thielen shared the following chart, showing that the recent correction has caused the price of Bitcoin to fall below the ascending trendline of the asymmetrical triangle. A break below this support line would signal a retest of the August 5 lows of Bitcoin, below $50,000.
“Bitcoin falling below $50,000 is inevitable.”
MN Capital founder Michael Van de Poppe has similar goals for Bitcoin. He noted that Bitcoin fell below the August 15 low of $56,000 to collect demand-side liquidity below it. However, this did not produce the required upside rebound, and Bitcoin faces the risk of falling further to $53,000 or even $49,000 before rebounding.
Meanwhile, Glassnode analysts expect Bitcoin to fall towards $51,000 as that level is the true market average and historical support level. “If a localized recession occurs, the $51,000 price level remains a key area of interest and must be maintained for further appreciation.”
