Bitcoin’s New All-Time High and SEC’s Lawsuit Against Ripple Dominate Crypto Headlines

CryptoCompare data shows the price of Bitcoin (BTC) moved up from around $26,800 at the start of the week to hit a new all-time high above $34,600 hit on the day the flagship cryptocurrency celebrated its 12th birthday.

Ether (ETH), the second-largest cryptocurrency by market capitalization, moved from $730 to over $1.100 in a significant spike. As the price of BTC corrected down to $28,200 at press time, ETH’s price dropped to $915.

As 2020 came to an end headlines in the cryptocurrency space were dominated by two major events: the price of BTC breaking the $30,000 barrier to hit yet another new all-time high, and the U.S. Securities and Exchange Commission (SEC) suing Ripple over the sale of XRP.

Several factors are believed to be behind Bitcoin’s price rise in 2020. These include the block reward having in May, which saw block rewards drop from 12.5 BTC per block to 6.25 BTC,  effectively cutting in half the supply of newly minted coins entering the market.

As supply dropped, demand started surging. In May, legendary trader Paul Tudor Jones II, founder and chief investment officer of asset management firm Tudor Investment Corp., explained in a letter to investors that he sees bitcoin as an excellent inflation hedge asset and that his fund “may hold as much as a low single-digit percentage of its assets in Bitcoin futures.�

Shortly after, Nasdaq-listed business intelligence software firm MicroStrategy announced it purchased “21,454 bitcoins at an aggregate purchase price of $250 million.� The move was followed by subsequent BTC purchases, to the point MicroStrategy now holds 70,470 BTC. Other firms, including Square, Ruffer Investment, SkyBridge Capital, and MassMutual also invested in BTC.

Bitcoin’s move up, backed by corporate adoption, saw VanEck propose a bitcoin exchange-traded fund (ETF) to the SEC, submitting an application for the “VanEck Bitcoin Trust.� A Bitcoin ETF is seen as advantageous as it would trade on exchanges in the same way shares of popular companies like Apple and Microsoft do.

VanEck has previously proposed Bitcoin ETFs to the agency, withdrawing its most recent application in September 2019. The VanEck Bitcoin Trust would trade on the Cboe BZX Exchange. So far, it’s worth noting, the SEC has rejected every application for a Bitcoin-based ETF it received. In August 2018, it even rejected nine proposals on the same day.

U.S. SEC Sues Ripple Alleging Firm Sold $1.3 Billion Worth of Unregistered Securities

On December 22, one day before former SEC Chairman Jay Clayton resigned, the SEC announced it had “filed an action against Ripple Labs Inc. and two of its executives, who are also significant security holders, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.�

At the heart of the lawsuit is the XRP token, which the SEC alleges is an unregistered security whose sale is still “ongoing.� It also names Ripple CEO Brad Garlinghouse and co-founder Chris Larsen. The regulator alleges:

·       “Ripple created an information vacuum such that Ripple and the two insiders with the most control over it—Larsen and Garlinghouse—could sell XRP into a market that possessed only the information [the] defendants chose to share about Ripple and XRP.�

Ripple has pushed back against the lawsuit, claiming it has already harmed “countless innocent XRP retail holders with no connection to Ripple,� and added that the charges “needlessly muddied� the regulatory environment for the whole cryptocurrency industry.

The fintech firm affirmed it will continue to support “all products and customers� both domestically and abroad. The majority of its customers, it added, aren’t in the U.S. and overall XRP volume is largely traded outside of the country.

After the lawsuit was announced several companies stopped supporting XRP in a bid to avoid legal complications. These include major cryptoasset exchanges, asset managers, market makers, and other firms.

The price of XRP plunged after the SEC’s announcement, from about $0.55 to a $0.18 low. It lost its position as the third-largest crypto by market cap.

Crypto AM: Market View in association with Ziglu

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