Market Deep Dive: The impact of the US Justice Department’s cryptocurrency enforcement action

BTC$ and ETH$ grinded upwards slowly this week, before breaking down on Wednesday when the US Justice Department announced that they would be holding a press conference regarding a “major, international cryptocurrency enforcement action.”

This announcement caused mass fear to spread across the market, with the disruption of large exchanges on top of everybody’s mind. BTC was down 5.5% after the announcement, reaching a weekly low of $20.4k. ETH$ dropped to 1.5k.

Before the press conference started, the DOJ released a notice on their website. Founder and majority owner of Russian exchange Blitzlato has been charged with unlicensed money transmitting. The exchange has processed more than $700 million dollars worth of illicit funds, including ransomware proceeds.

Blitzlato had at peak $6m worth of assets, and $11k when the charge hit. For the market, this ended up being much of a “non-event”. However, I think with this “small” bust by the National Crypto Enforcement Team (NCET), which was founded in 2021, shows the world that investigations are being carried out on entities in the market, and that more is to come.

US economic data was released on Wednesday and Thursday and reaffirms the drop in inflation from December and a strong labour market.

  • PPI lower than forecast and previously
  • Retail sales (consumer spending) lower than forecast and previously
  • Initial jobless claims were less than forecast and previously

Altcoins continued to show their potency.

The top gainers this week were Frax Share (FXS), Decentraland (MANA), and Aptos (APT). Frax Share is likely gaining traction from the increase in the amount of frxETH. The DeFi platform boasts a variety of functions, including its own stablecoin, swap and lend market, as well as an ETH liquid staking derivative. The amount of frxETH has increased by 46% in the last 30 days to 53k. In comparison, RocketPool gained 8% more staked ETH in the last 30 days, for a total of 358k.

DCG suspended dividends, and Genesis reportedly filed for Chapter 11 bankruptcy protection late Thursday night.

The company listed over 100,000 creditors, owing over $3.5bn to the top 50 creditors. This comes after the SEC announced on Jan. 12th that it had charged Genesis and Gemini with offering unregistered securities. This story will be crucial in determining the future of the Grayscale trusts and any additional contagion effects within the market.

Happy Trading!

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