Market Deep Dive: The SEC charges against Binance impact crypto regulations and investor sentiment

This week, the SEC filed 13 charges against Binance entities and its founder Changpeng Zhao. Binance is accused of misrepresenting trading controls on Binance.US and offering unregistered securities. Yesterday, Binance.US announced that USD withdrawals will be put on hold by June 13, 2023. Earlier in the week, BTCUSD was trading at a premium of almost 7% on Binance.US, indicating investor fears about withdrawing funds. However, after Binance announced that USD withdrawals would still be possible for a while, the premium disappeared and even turned slightly negative.

The SEC’s accusations have significant implications for crypto regulations, as it classified many large cryptocurrencies as securities, including Binance Coin, Near, Internet Computer, Solana, Cardano, Polygon, Sandbox, and Decentraland.

In the coming weeks and months, more SEC actions are expected. The key question is whether the regulatory crackdown in the US will prompt other regulators worldwide to follow suit, particularly in defining which cryptocurrencies are considered securities. Notably, in Europe, securities are regulated under MiFID II rather than the newly introduced MiCA regulation.

BTC$ reacted to the news but ended the week only 1% lower, currently trading at 26,500. Similarly, ETH$ is slightly lower compared to a week ago, currently at 1,845.

BTC and ETH 30-day implied ATM volatility remain at historically low levels, currently at 37.4% and 35.9% respectively. This contrasts with the 1-year averages of 59.4% for BTC and 73.9% for ETH. It is unusual to see ETH options priced lower than their BTC counterparts.

Equity volatilities are also at historically low levels, with the VIX currently at 13.6 compared to the 1-year average of 22.5.

Next week, the market is anticipating fresh US inflation numbers on Tuesday and the Fed’s interest rate decision on Wednesday, along with the Fed’s interest rate projections. The market currently expects a high likelihood that the Fed target rate will remain unchanged in June at 5.00%-5.25%.

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