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The crypto market remains hot as investors continue to pile into new spot bitcoin (BTC) exchange-traded funds ahead of the highly anticipated bitcoin halving event in April.
At the same time, the global digital asset regulatory environment is coming into sharper focus for crypto investors. In March, European regulators passed new anti money-laundering legislation, while the U.S. Securities and Exchange Commission took steps to potentially classify Ethereum (ETH) as a security ahead of an important May deadline on several spot Ethereum ETF applications.
The three month stretch from February through April has historically been a strong period for bitcoin prices, and investors are optimistic the early 2024 crypto rally can continue into the second quarter.
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March Crypto Market Performance
Bitcoin prices rallied in the first half of March to a new intraday all-time high of $73,750 before spending the second half of the month in a wide trading range between around $60,000 and $72,000. Bitcoin prices finished the month at $70,849, a 14% monthly gain. Ethereum prices gained 5.8% in March to close out the month at $3,611.
Among the 10 largest cryptocurrencies by market capitalization, memecoin Dogecoin (DOGE) was the best March performer with a 133.8% gain. Cardano (ADA) was the worst performer with a 5.5% gain.
The crypto market has maintained its bullish momentum in 2024 after Ethereum rallied 85% and bitcoin gained nearly 150% in 2023. Heading into April, bitcoin prices are up another 64.9% year-to-date, while Ethereum prices are up 55.6%.
Crypto ETFs Take Center Stage
The SEC approved 11 spot bitcoin ETFs in January, giving investors their first opportunity to invest in funds that hold cryptocurrency directly rather than holding crypto derivative products.
Trading volumes in the most popular spot bitcoin ETFs, including the iShares Bitcoin Trust (IBIT), the Fidelity Wise Origin Bitcoin ETF (FBTC) and the VanEck Bitcoin Trust ETF (HODL), surged as bitcoin prices broke out to new highs in March.
The Grayscale Bitcoin Trust (GBTC) experienced record outflows in March, but those outflows were likely tied to Genesis and Gemini bankruptcy liquidations.
James Wo, founder and CEO of Digital Finance Group, says the spot bitcoin ETFs continue to play a central role in the 2024 crypto rally.
“Bitcoin broke past its all-time high in March as the bitcoin ETFs saw a daily net inflow of over $1 billion, an amount higher than the inflow experienced from the launch date. As more participants seek to gain exposure to cryptocurrencies, the bitcoin ETFs provided easier access to this asset class, which fueled the strong demand in March, pulling up the rest of the crypto market with it,” Wo says.
Next Up: Ethereum ETFs?
Ethereum investors have cheered the success of the new spot bitcoin ETFs in the hopes that the SEC will soon approve a handful of pending applications for spot Ethereum ETFs from companies such as BlackRock and VanEck.
However, in March the SEC pushed back a deadline for ruling on VanEck’s spot Ethereum ETF until May 2024. The regulator previously bumped back deadlines to rule on spot Ethereum ETF applications from Hashdex and ARK 21 Shares as well.
Some of the world’s leading crypto investors believe the market for spot Ethereum ETFs could be even bigger than the market for spot bitcoin ETFs, since Ethereum’s proof of stake consensus mechanism allows investors to earn cash off their investments via staking, something bitcoin cannot offer, which could make Ethereum ETFs the preferred option for investors.
Regulatory Crackdown in the U.S.
The SEC is reportedly probing companies that have dealings with the Ethereum Foundation as part of a push to classify Ethereum as a security. The Ethereum Foundation is a nonprofit group that oversees the development of the Ethereum blockchain.
SEC Chair Gary Gensler has suggested in the past that the SEC considers the vast majority of cryptocurrencies to be securities, although Gensler has specifically said bitcoin is an exception to this rule and is considered a commodity.
Regulatory Crackdowns Around the Globe
On March 19, the European Union’s Economic and Monetary Affairs Committee and the Civil Liberties, Justice and Home Affairs Committee passed the Anti-Money Laundering Regulation, or AMLR, a new set of laws that restrict large and anonymous cash payments, whose origin might be illegal activity.
The new laws limit cash payments to 10,000 euros, or $10,800 at current prices, and they limit anonymous cash payments to 3,000 euros, or $3,240 at current prices. The AMLR laws are expected to go into effect in Europe in 2027.
Anthony Rousseau, head of brokerage solutions at TradeStation, says the European anti-money laundering laws could have been worse for crypto investors. Proposed noncustodial crypto wallet limits didn’t make the final cut of the law.
“This is a big deal because the war on cash/cash like money movements and privacy from governments continues to erode personal financial freedom and will stifle innovation in the EU,” Rousseau says.
“Non-custodial wallets limits may have not been impacted yet but are under scrutiny and will absolutely change how people can operate and build in the digital asset space.”
The new anti-money laundering laws in Europe follow multiple reports that Chinese gangs responsible for shipping a key ingredient of fentanyl to drug cartels in Mexico and Central America have used cryptocurrency to launder billions of dollars and send and receive anonymous payments.
China has taken an extremely hard-lined approach to cryptocurrency, banning trading outright, shutting down exchanges and even jailing crypto industry executives.
Sam Bankman-Fried Sentenced
On March 28, disgraced FTX founder Sam Bankman-Fried was sentenced to 25 years in prison due to his role in the 2022 collapse of his popular crypto exchange, FTX. Bankman-Fried was also fined $11 billion for the U.S. government to pay to fraud victims.
In November 2023, Bankman-Fried was found guilty on seven charges related to FTX’s downfall, including fraud, conspiracy and money laundering.
FTX reached a peak valuation of around $32 billion. A jury ultimately held Bankman-Fried responsible for nearly $10 billion in customer deposits that went missing in 2022. Bankman-Fried plans to appeal both the conviction and the sentence.
Other Crypto Headlines
In mid-March, the Ethereum network completed its highly anticipated Dencun update, a software upgrade designed to make the network cheaper to use and more scalable over time. The update will lower expenses for so-called Layer 2 networks as Ethereum competes with other blockchain networks to maintain its dominance as the leading smart contract platform.
On March 27, the SEC scored a major court battle victory in its lawsuit against popular crypto exchange Coinbase. The SEC has accused Coinbase of acting as an unregistered broker and exchange, and a U.S. district judge has rejected Coinbase’s bid for a dismissal and ruled the SEC case may proceed to trial before a jury.
The surge in crypto prices in the past year has reportedly rekindled venture capital appetite for crypto startups. Crypto startups raised at least $735 million in the month of March, according to analytics provider CryptoRank.
The government of Nigeria is blaming crypto exchange Binance for fueling a steep collapse in the country’s fiat currency. With inflation rates in Nigeria reaching nearly 30% earlier this year, Nigerians have used Binance’s platform to flock to stablecoins pegged to the U.S. dollar and have undermined the Nigerian government’s efforts to control foreign exchange rates and stabilize the naira.
What To Watch in April
The next bitcoin halving event is right around the corner, likely in late April.
Each time 210,000 blocks of transactions are added to the bitcoin blockchain, the network automatically undergoes a halving, during which the reward bitcoin miners receive for validating a block of transactions is cut in half. Bitcoin halvings reduce the supply of new BTC created.
Historically, bitcoin prices have bottomed roughly a year before a halving occurs and continue to rally for roughly a year after a halving is completed.
Alan Mittleman, chief operating officer at Secure Digital Markets, says the bitcoin halving could easily propel BTC prices to new highs.
“This puts a strain on an already overpowering demand curve for BTC as ETFs have been buying as much as seven to 10 times the amount of BTC that is produced everyday. Historically, the halving has been the start of the four year market cycle, and this dynamic is expected to continue amidst institutional interest through the ETFs,” Mittleman says.
Crypto investors will also be watching for updates on the economy and the U.S. monetary policy outlook, paying particularly close attention to data on inflation, interest rates and the labor market.
Investors will get a key economic update on April 10 when the Federal Open Market Committee releases the minutes from its March meeting, which could provide some insight about the potential timing of an FOMC pivot to rate cuts ahead of its May 1 monetary policy statement.
