The Risk From Crypto Lawsuits Isn't What You Think

Editor's note: Cryptocurrencies are famously volatile... And right now, they're getting put to the test. So today, we're turning to our colleague Eric Wade, editor of the Crypto Capital investment newsletter. In this piece, he dives into what the latest regulatory skirmish in crypto means – including why he believes investors who stay on the sidelines could miss out on a long-term rally...

Blockchain users and cryptocurrency investors have had a lot to worry about over the past few weeks...

On June 5 and 6, the U.S. Securities and Exchange Commission ("SEC") sued two major cryptocurrency platforms. It started with Binance, then Coinbase.

The SEC alleges that Coinbase has been operating as an "unregistered broker." It says the company has been selling cryptos "as investment contracts, and thus as securities." The case with Binance is similar.

That's the quick rundown. As an interesting note, the SEC said that Binance and Coinbase were selling people more coins than they need for personal use... which shows that the SEC understands these coins and tokens have utility.

Importantly, though, these legal cases won't kill crypto.

What they are doing is creating a more urgent setup for investors. It's a side of this story that nobody seems to be talking about.

That's especially true because, right now, the U.S. is at a unique moment in time. Today, we'll take a quick look at what's happening. And if I'm right, life-changing gains are possible for long-term crypto investors...

Let's start with the price action. As you might imagine, crypto prices dropped when the lawsuit against Binance was announced.

It happened fast – but it's also remarkable that they didn't drop even more, considering that Binance runs one of the biggest cryptocurrency exchanges in the world.

The next day, the SEC announced its Coinbase lawsuit. But instead of falling further, crypto prices went up – especially bitcoin...

As the days progressed, though, that rally faded away. Fear, uncertainty, and doubt ("FUD") swept across crypto communities... with investors dumping coins and tokens with real value, rather than face holding them if the SEC attacks again.

Now, a small part of that fear was justified. The Binance.US crypto exchange (the arm of Binance which U.S. residents can use) told users that its banking partners were pulling out, and that after June 13, no U.S. dollar deposits or withdrawals would be possible. Crypto prices quickly dropped again... shaving $60 billion off the overall market cap.

But, critically, that's what shows me the other side of this story... Investors might run out of time to get their dollars into crypto.

Let's face it. We're living in a time with ridiculous government spending and poor financial management...

Remember, just a few weeks ago, the U.S. House of Representatives passed a bill misleadingly named the "Fiscal Responsibility Act of 2023"... a bill that uncapped the U.S. debt ceiling until January 2025.

While crypto investors might be able to shake off the threat of SEC lawsuits, they can't shake off the notion that if the dollar starts losing favor around the world, people holding dollars risk being on the outside of sound currency, looking in.

Bitcoin has a 1.76% inflation rate... And by design, it will never again be higher than that. As for Ethereum (ETH), the second-largest cryptocurrency by market cap, its inflation rate fluctuates, but it has been negative since January 2023.

Both coins are highly liquid and accepted by merchants around the world. And they can be used for numerous purposes other than just spending. To crypto investors, their low inflation is appealing even if their prices fluctuate wildly.

In fact, volatility often works in the favor of crypto investors... because that's what drives these assets' incredible rallies.

And as a result of that same volatility, investors are now at major risk of missing out...

If America – now with no debt ceiling – continues to inflate the dollar with questionable spending, then bitcoin and other cryptos with their limited supplies could rise so rapidly that many folks on the sidelines may get priced out entirely.

We're getting a small taste of that possibility now.

Last week, investment firm BlackRock – a giant with $9 trillion in assets under management – filed to launch a bitcoin spot exchange-traded fund ("ETF"). Fidelity Investments has announced its intention to do the same... And Invesco and WisdomTree Investments both rekindled applications they'd submitted long ago for their own bitcoin ETFs.

That news lit up the imaginations of crypto investors who see it as increased demand in the midst of scarcity. Bitcoin surged on the news... which could be the early stages of prices rising so quickly that hesitant investors get left behind.

Add these factors together... low-inflation cryptos, and scarce coins facing rising demand... and that's why I'm predicting bitcoin will hit $80,000 soon – and potentially $1 million in our lifetimes.

Luckily, Binance.US and Coinbase aren't the only options in the U.S. for buying cryptos...

There are at least 12 different reputable exchanges in America, plus bitcoin ATMs, Coinstar (which accepts cash), blockchains that accept credit cards and digital wallets, and any number of decentralized applications ("DApps") that allow direct purchases of a dizzying variety of coins and tokens.

Don't let the next crypto rally pass you by.

Good investing,

Eric Wade

Editor's note: Eric says one more critical factor could push bitcoin to new heights. That's because all of this is happening before the impending launch of the U.S. Federal Reserve's FedNow... coming as soon as July 1. This launch is a huge technological upgrade for the U.S. banking system. And according to Eric, this new "digital dollar" is going to drive even more crypto adoption in the months ahead. Click here for the full story.

Further Reading

If you're unclear on your investment goals, fear can lead you to sell at exactly the wrong time. With volatile assets like bitcoin, it's easy to let emotion take over. But volatility can also be your friend – as long as you keep the "long game" in mind... Read more here.

"Most folks will tell you individual investors are fighting an uphill battle," Brett Eversole writes. But you can set yourself apart from the crowd – and even the pros – if you master the cornerstone of contrarian investing: being right that the market is wrong... Learn more here.