As Inflation Data Approaches, Crypto Market Cap Drops Below $1 Trillion Following The BUSD Halt

In the wake of the release of key inflation data and the latest regulatory action taken by the U.S. government, cryptocurrency prices have been under pressure on Monday.

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There was a drop below $1 trillion in the total market cap of the cryptocurrency market on Monday afternoon, according to the latest data from CoinMarketCap, the first time in three weeks the market cap has fallen below this threshold.

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It has been reported that Paxos, the company that has been issuing stablecoins since early this year, has been ordered to stop making new units for Binance's BUSD stablecoin by the New York Department of Financial Services (NYDFS). The order was the latest in a long list of regulatory actions against crypto companies that have already taken place this year.

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"Caitlin Long, founder and CEO of Wyoming-based crypto custodian, Custodia Bank, told Yahoo Finance Live on Monday that the current situation is de-banking the crypto industry, cutting off stablecoins, and clarifying unregistered securities." Long said on Monday.

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Long's firm was denied Federal Reserve membership on January 27 after applying to become a member.

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Following a sharp rally to start 2023, investor enthusiasm has also tempered in recent weeks after regulatory actions.

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Global asset manager VanEck's CEO Jan van Eck told Yahoo Finance that risk assets, such as equities and crypto, are unlikely to do well in the first half of the year due to the strong economy, inflation, and labor market, which suggest higher interest rates for longer periods of time.

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Christopher Newhouse, a crypto options trader for industry investment firm GSR, says expectations in the crypto options market are less optimistic than last month as the U.S. consumer price index is set to be released tomorrow.

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Newhouse told Yahoo Finance that the $25,000 price figure may act as a strong level of resistance as the CPI print approaches. Long-term volumes have been elevated, liquidations have been prevalent, and there is a large number of calls being sold at that price level.

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Positions are "negative across the board," according to Newhouse, citing "bearish regulatory concerns" as a reason for the increased demand for "downside protection."

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Bitcoin's (BTC-USD) price traded near $21,600 on Monday afternoon, down about 1%.

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As part of the settlement, Kraken immediately eliminated its staking program for U.S. customers. Last week, the SEC brought four enforcement actions against crypto firms.

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As a result of the news, Coinbase Global shares (COIN ) declined 1.2% on Monday a day when the Nasdaq gained 1.5%. Coinbase shares have lost about 24% during the past five trading days.

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Paul Grewal, Coinbase's chief legal officer, said Thursday that the company does not plan to shut down its own platform since it is "fundamentally different" from Kraken's.

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A Trade Algo estimate calculated by an analyst previously predicted Coinbase's staking program would account for 12.5% of its full-year revenue or $347 million in 2023.