Bitcoin and ether dip to end the week, and crypto firm Consensys sues the SEC: CNBC Crypto World

Today, Bitcoin continues to stall at the $63,000 level. Crypto firm consensus sues the SEC over Ethereum regulation, and investment strategist Lynn Alden weighs in on how crypto currencies stack up against Wall Street’s performance as macroeconomic pressures weigh on investors minds. Welcome to CNBC’s crypto world. I’m Tanaya Mckeel. Cryptocurrencies under pressure as we head toward the weekend. By noon Eastern Bitcoin was down by a little less than 1% at the $63,000 level, while ether edged lower by 1.3% to trade at about $3100. Solana fell 3 1/2% to $142. Today’s losses helped push Bitcoin lower for the week, adding to its monthly slide of about 10%. Ether is slightly higher for the week, but still about 15% off its recent highs and pacing for a monthly decline. OK, let’s talk about the top stories. Consensus, a major backer of the Ethereum blockchain, filed a lawsuit against the SEC in order to quote defend the Ethereum ecosystem. The crypto firm claims the SEC is seeking to regulate ETH as a security, even though ETH bears none of the attributes of the security and that it participated in regulatory overreach. The suit also claims the SEC has wavered on Ethereum’s classification as a security. The lawsuit revealed that Consensus received a Wells notice from the SEC earlier this month. In that notice, the agency said it intended to bring enforcement action against Consensus for allegedly violating federal securities laws through its Metamask swaps and Metabask, staking products by offering it’s Metamask wallet software. According to the filing, the SEC believes Consensus acts as a broker and offers and sells securities, even though the software doesn’t hold customer assets or carry out transactions. In a blog post yesterday, Joseph Lubin, the CEO of Consensus and an Ethereum Co founder, called the lawsuit an important step towards preserving access to the Ethereum blockchain. The agency declined to comment on the lawsuit. Next, Stripe is bringing back crypto payments by allowing users to accept stable coins for online transactions. In a post on X yesterday, the Co founder of Stripe, John Collison, announced that the company will start supporting global Stable coin payments this summer. He said transactions instantly settle on chain and automatically convert to dollars. The company said it’s starting with USDC Stable Coins and that payments will be available on the Solana, Ethereum and Polygon blockchains. In a keynote addressed at Stripes Global Internet Economy Conference, Collison said crypto is finding real utility and that with transaction speeds increasing and cost dropping, crypto is quote finally making sense as a means of exchange. This announcement comes six years after the payments firm dropped support for Bitcoin, citing the tokens, notoriety for volatile price swings and a lack of efficiency in making everyday transactions. And finally, the European Parliament has adopted new rules targeting money laundering. The laws include provisions that allow direct and free access to national registries of financial information. Institutions like Crypto Asset Managers would be required to conduct enhanced due diligence and report suspicious activities to financial intelligence units in the region. On top of that, a new agency called the Authority for Anti Money Laundering and Countering the Financing of Terrorism would be established. Although the law was adopted by Parliament, the EU Council still needs to formally adopt the rules before they’re published in the E US Official Journal. All right. Going back to markets for our main story, I spoke with Lynn Alden, founder of Lynn Alden, Investment Strategy and Board Director of Swan Bitcoin, for insight on Bitcoin’s performance in the face of macroeconomic pressures. Plus, she weighs in on what could drive the cryptocurrency’s next rally. Let’s dive right into it. Bitcoin has been trading in a narrow range all month. What do you make of that? And what do you think could drive it higher again either above 7 DK, which is kind of the ceiling it’s been, which has been its ceiling for the last month or so or even further to you know its recent highs from March. So I think it’s natural that after an asset goes up very quickly in price that it has to kind of cool off or consolidate for a period of time. So I think that’s totally normal. In general, I think that Bitcoin is likely going to follow measures of global liquidity. And so whenever the dollar index is pretty strong or money supply growth slows down these kind of anti liquidity actions that generally puts a a pretty good amount of headwinds against Bitcoin and that’s what that’s what we’ve been seeing over this past month. You know the market is pricing out some of the rate cuts they’ve seen because of increasing inflation expectation there. There’s been a a bit of a flight to safety because of geopolitical issues. And so all of that kind of pressures assets that are very tied to liquidity including Bitcoin. It’s not the only variable but it’s a big variable. So I would expect probably chopping around at a range for a while longer, but when you look out 12 months or more, I expect probably see higher liquidity and to a Bitcoin have have followed up during that time frame. And I’m pulling it back to what’s happening in the short term. We had a big market day yesterday, U.S. economic data showing a sharp slowdown in growth and pointed to persistent inflation. So there were big declines in all of the major stock indexes that Bitcoin was pretty resilient. So what did you make of Bitcoin’s performance given the stock market day we had yesterday? So I try, I try to be careful reading into any one day periods. But in general, one thing I would point out is that you know USUS stocks, there’s really a couple major components that that make them behave a certain way in a period of time. One is the expectation of their forward performance, which is heavily tied to economic performance and then the other one is the valuation component. So basically what is the discount rate that you’re comparing them to? If the yields are going higher in, in a vacuum that can put pressure on some of the equity valuations. And so that combination of weak economic data but still sticky inflation data is kind of the worst case scenario for expensive equities because it keeps the pressure on their valuation side, it keeps it keeps the yield pressure on, but it also reduces expectations around what they might earn over the next call at 12 months or more. Whereas Bitcoin and and also assets like gold, basically these these kind of hard money assets, they are still tied to the discount rate. So what you can get on a real basis with things like treasuries for example, that that affects them. That’s why liquidity and other measures of of things like that are a big impact on those assets, but they’re not as tied to economic performance in the US or any other given country. And so if you do see signs of stagflation, then assets like Bitcoin, especially if it’s not, it’s not overbought in the near term sense. That might be an interesting asset to look into. I think the market is assessing that out, but there’s multiple things that can move Bitcoin. It’s still small enough that individual announcements of institutions getting into it or legal action on certain Bitcoin related services, these things can still move the price because it’s a fairly small still volatile asset. But those things of of economy, liquidity and then market specific information all all affected actually really good context for my next question which is about correlations. So we look at stocks and gold a lot, gold in the last year especially and we’ve seen from Bitcoin that it can, that it can and has behaved like both of those assets. So, you know, I guess the question is how do you see it at the moment and what’s the likelihood that Bitcoin has a delayed reaction And, you know, stocks kind of finding or fitting again today, but what is the likelihood that you think Bitcoin has a delayed reaction and could turn down the way stocks have been? So I think it can turn down for any variety of reasons, but generally, Bitcoin doesn’t really have delayed reactions. If anything, it usually has early reactions because it has 24/7 liquidity. It can trade over weekends. It can trade over the middle of the night. It tends to have reactions that if anything, precede what we see in the stock market. So I wouldn’t really expect a delayed reaction from this particularly, but that that doesn’t exclude other things that could make the price go down. And you know, in general, it is important to remember that Bitcoin is a global asset. It’s not just traded in the US, it’s traded in exchanges around the world. It has buyers and holders from around the world, much like gold in that sense. And so it can have periods of time where it does seem very correlated to U.S. stocks but then other times where the market regime is entirely different and stocks could be could be facing stagflation issues and things like that. While things like gold or Bitcoin could be going up in price because they’re they’re a global asset and there have been periods of time where North American buyers were the were the key drivers of Bitcoin price. There are other times where European buyers or Asian buyers maybe because of economic conditions or liquidity conditions in their own region they they tend to be the primary buyers. And so I I think it’s you can’t extrapolate too much from any kind of given correlation other than over the long term it’s not particularly correlated to to U.S. stocks. The best correlation I’ve found between Bitcoin price and anything else is is basically measures of global liquidity, which means the dollar index and the rate of money supply growth are all fairly important inputs to to what Bitcoin is probably expected to do over any given 12 month period. Even then, that’s not guaranteed and so and another fact to keep in mind is that if you have two assets that you know usually go up on the same day and usually go down on the same day, absolute performance still matters right? So for example, if you compare say Bitcoin to to ARC ETF for example, on average they probably go up or down in tandem more often than not. But then over a three to five year period, there ends up being a big performance gap between Bitcoin and Arc. And that’s not to pick on that particular ETF. But basically, although correlations are important, at the end of the day you want absolute returns as well, so you want to invest in the best of class asset for that particular portfolio slice. And so I view Bitcoin as not only a good performing asset, but that one that is tied to global liquidity and is not necessarily correlated to other other portfolio assets. OK, That’s all for Crypto World this week. We’ll be back again on Monday and we’ll see you then.