Markets Jump But Then Stagnate Again

Minor Short Squeeze Isn’t Enough To Kickstart Sustained Growth

Today a nice little pop helped us recover some of the market cap we lost yesterday.

As I mentioned yesterday, rising shorts could predicate a small short squeeze, which is definitely what we saw today, but ultimately the move would still trend downwards without more volume.

We’re still expecting a test of the lows, but interestingly we’re seeing a lot of good altcoin ratios, which could signal bullish for us.

Ultimately, however, this market is dominated by the large caps and they are clearly not moving very much.

In today’s news, we didn’t see much that was mind-blowing, hence the flat market.

Still, we should mention some of the recent news that has definitely cemented this week’s focus on Wall St. and regulation.

For one, we saw Poloniex de-list three assets and remove margin and lending products for US clients.

Remember that Poloniex is owned by Circle, which is in turn owned by Goldman Sachs, so any move Poloniex makes is really an extension of Goldman’s will.

It certainly brings back memories as I used to enjoy talking to other traders on the Poloniex trollbox before they removed it in June of 2017. Poloniex also used to be my main platform for trading before I switched to Bittrex and then later Binance when it launched.

Still, Poloniex has always played a role in this space, and it’s bittersweet to see it so different a year later.

This is easily Goldman preparing the platform for more regulatory compliance. As the regulatory landscape is shifting every day in this space, it makes sense that they’re playing it safe.

Speaking of, let address the big news from yesterday regarding US regulation.

A ruling on Wednesday declared virtual assets to be commodities, bringing virtual currencies under the CFTC’s jurisdiction.

“This is an important ruling that confirms the authority of the CFTC to investigate and combat fraud in the virtual currency markets.  This ruling…recognizes the broad definition of commodity under the CEA, and, also, that the CFTC has the power to prosecute fraud with respect to commodities including virtual currencies.  We will continue to police these markets in close coordination with our sister agencies.”

So, what’s the importance of that? Didn’t I cover this yesterday with Giarcarlo’s remarks regarding the CFTC’s role?

Yes, I did, but I want to stress on this point a little more: this opens the door just a little bit wider for the Bitcoin ETF and other subsequent exchange-traded products.

Why?

Well, the main criticism that the SEC has levied against the ETF applications it has shot down has been regarding market manipulation and the apparent lack of any means to stop it. The SEC’s job is to protect investors, and they argue that such a heavily manipulated market is the antithesis of safety.

Or so it was until the CFTC was granted this new jurisdiction. Now we’ll have more clarity regarding the cryptoasset regulatory landscape, and we also got further confirmation that Bitcoin is a commodity (which we already knew but it’s still important).

In a sense, this gives the CFTC the power and authority to go after the fraudulent actors in the space, and in turn combat the market manipulation by stamping it out at its source.

Of course, that’s putting the cart before the horse somewhat.

There’s never been a market like the crypto market, even if it’s reminiscent of other markets. The CFTC could prove ineffective in this new and challenging space, which would also prove to be a red flag against the Bitcoin ETF.

TIme will tell how this will go, but ultimately it is a step in the right direction.

At the end of the day, we have to welcome regulation that helps the space grow in a meaningful way.

If we want adoption, we first need to prove we deserve it.

One interesting addendum is that the SEC opened up the GraniteShares Bitcoin ETF, the GraniteShares Short Bitcoin ETF, the Direxion Daily Bitcoin Shares, the ProShares Bitcoin ETF, and the ProShares Short Bitcoin ETF for public comment.

What’s really interesting is that these were all previously denied applications. They will all be closed again and decided on by October 26th, 2018. They are all still consider denied unless the commission decides otherwise.

No concrete reason was given for why these were reopened, other than citing  “Commission Rule of Practice 431: Commission Consideration of Actions Made Pursuant to Delegated Authority” subsection (e) which reads as follows:

While likely nothing should be made of this, it is intriguing to see the SEC going back through past applications.

All eyes should still be on the yet-to-be-decided VanEck/SolidX Bitcoin ETF, but nonetheless, this could indicate something we can’t see at this moment.

Time will tell.

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Defensive Actions for the next trading day: 

• None.