Look back at July: Rate hikes swept away gains made on partial US regulatory win

Crypto markets ended in negative territory in July as interest rates reaching multiyear highs, weighing on investor sentiment.

Crypto currencies traded sideways during the first half of the month until the long-awaited ruling of a US judge in the  Securities and Exchange Commission’s (SEC) case against Ripple’s crypto currency XRP was announced on July 13. The crypto sphere soared on the news, with crypto enthusiasts claiming a landmark win against the US regulator.

The exuberant mood turned during the second half of July as lawyers dissected the ruling in greater details, showing that the ruling only was a partial victory in the crypto industry’s favor. The rate hikes that followed put additional downward pressure on the global crypto sphere.

Both the US and European central banks raised their benchmark rate in late July. This move pushed crypto assets lower, as higher interest rates mean investors can generate higher returns with less risky assets such as bonds. They in turn switch away from riskier crypto assets.

The monthly cryptocurrency exchange volumes fell to 420 billion US dollars in July – the lowest trading volumes since October 2020, data from the Block shows. Binance remains the largest exchange with a market share of 45 percent.

Bitcoin falls on profit taking as investors await ETF approvals

Bitcoin reached a 14-month high buoyed by the Ripple ruling mid-July, before falling back on profit taking. The largest cryptocurrency dropped 5.1 percent in July and traded below the 29,000 US dollar threshold at the end of the month.

Bitcoin had been boosted by several filings for spot Bitcoin exchange traded funds (ETFs) to the US regulator in June. These applications had sparked a massive interest in Bitcoin, which is up 75 percent since the beginning of the year.

The second-largest crypto currency remained the biggest target of blockchain scams during the first half of the year. More than three quarters of the universe’s total losses, 350 million US dollars, incurred on the Ethereum blockchain. Ethereum fell 3.9 percent during the month.

Ripple’s XRP outperforms after key ruling partially in its favor

XRP rallied 43 percent during the month of July after its owner Ripple won a partial victory in a US district court. The SEC had sued Ripple in December 2020 claiming that the crypto firm had engaged in illegal trading of securities to retail investors. But the judge Analisa Torres ruled that sales of XRP to retail investors through crypto exchanges and through algorithmic trades do not qualify as securities, only when sold directly to institutional investors through written contracts.

The verdict sets a precedent for whether cryptocurrencies qualify as securities or commodities in the US. This matter as the US crypto market is the world’s largest. Commodities are less regulated than securities and taxed more favorably.

Legal experts expect the SEC to appeal the ruling and have a good chance of winning their case. The regulator confirmed it “the various available avenues for further review and intends to recommend that the SEC seek such review.”

Polygon bucks negative trend on new CEO & Dogecoin on crypto payment hopes

Polygon (MATIC) finished the month in positive territory, up 1.3 percent after announcing that Marc Boiron, a crypto veteran, will take over as its CEO. So did Dogecoin, rallying 14 percent in July. Investors hope that the ongoing overhaul of the entrepreneur Elon Musk’s social media channel Twitter, renamed X, will open the door for payments in crypto currencies on the platform. Dogecoin is known to be Musk’s favorite cryptocurrency.

Binance obtains licenses in Dubai & Japan

Binance obtained Dubai’s first operational minimum viable product (MVP) license, enabling the world largest crypto exchange to offer exchange and broker-dealer services to institutional as well as qualified retail investor in July. The exchange also announced it will launch local operations in Japan during August.

In-house, Binance faced the departure of several top executives and reports emerged reporting it will fire more than 1,000 employees. Binance traded unchanged in July.

Litecoin falls ahead of its halving

One of the first crypto currencies around, Litecoin, fell 18 percent ahead of its halving taking place on August 2. This event will diminish the coin’s mining reward from 12.5 Litecoin to 6.25 Litecoin. The next halving is scheduled in four years, so in 2027. Read more about what a halving means here.

Four crypto bills pass first legal hurdle in the US & Kuwait ban

The Financial Services Committee of the US House of Representatives passed four crypto-related bills during the month: 

• The Financial Innovation and Technology for the 21st Century Act (FIT), which clarifies which digital assets are regulated by SEC or by the Commodity Futures Trade Commission (CFTC).
• The Blockchain Regulatory Certainty Act, which stipulates that blockchain developers and providers of blockchain services are not considered as financial institutions or money service businesses under the law if they do not hold consumer funds.
• The Clarity for Payment Stablecoins Act, aiming at establishing a clear legal framework for stablecoins in the US.
• The Keep Your Coins Act of 2023, which will ensure that consumers are allowed to maintain custody of their digital assets in self-hosted wallets.

These four bill are now being passed on to the US Congress for debate and vote.

In Singapore, the regulator adopted new rules impacting the country’s crypto providers. They aim at mitigating the risk of loss or misuse of customers’ assets and facilitate the recovery of customers’ assets in the event of a digital payment token (DPT) service provider’s insolvency.

Meanwhile, the Capital Markets Authority of Kuwait reaffirmed its total ban on crypto assets in a circular. “It is prohibited to deal with virtual assets as a means of investment,” the CMA said.