After dramatically collapsing this spring, the crypto market is attempting a comeback.
What’s happening: Bitcoin and Ethereum prices jumped on Monday as investors showed they’re willing to increase exposure even after recent drawdowns. Bitcoin, which hit an all-time high of nearly $65,000 in April, plummeted as low as $28,800 last week. It was last trading above $34,000.
But the volatility coincides with fresh scrutiny from regulators that investors will need to keep an eye on.
Over the weekend, Britain’s financial regulator banned Binance, one of the world’s biggest cryptocurrency exchanges, from offering certain services in the country.
The Financial Conduct Authority said in a statement on Saturday that Binance “is not permitted to undertake any regulated activity in the UK.” Trading cryptocurrencies is not directly regulated in the United Kingdom, but other related activities — such as selling derivatives — do require approval.
Japan’s watchdog also said Friday that Binance isn’t registered to do business in the country.
The moves against a major player in the industry come as trading digital coins soars in popularity.
Earlier this month, the FCA published research indicating that an estimated 2.3 million Britons now own crypto assets despite warnings about the risks. Just 38% see their bets as a gamble, down from 47% in 2020, and about half say they plan to invest more.
Yet regulators around the world are starting to take a tougher stance.
Finance and banking watchdogs in China have said that financial institutions and payment companies should not participate in any transactions related to cryptocurrencies, and should not provide crypto-related services to their clients. The government is also cracking down on bitcoin mining.
Earlier this month, the Bank for International Settlements said that banks that hold crypto assets should face stricter rules.
“While banks’ exposures to crypto assets are currently limited, the continued growth and innovation in crypto assets and related services, coupled with the heightened interest of some banks, could increase global financial stability concerns and risks to the banking system,” the institution said.
And the US Securities and Exchange Commission recently kicked the can again on whether to approve a bitcoin exchange-traded fund, which could make it easier for investors to gain exposure to the market.
Step back: Higher regulation has long been a threat to crypto’s mainstream adoption, but governments have been slow to act. Now, regulators appear to be getting more worried, citing the need for greater consumer protections and the broader financial system’s exposure.
That could keep a lid on prices — even though the market still has its share of bulls.
Meet the short seller who hopes stocks will plunge
It should be no surprise to hear that the founder of an investment firm named after the Hindenburg is looking for stocks that will crash and burn.
Nate Anderson, the founder of Hindenburg Research, has made a name for himself targeting companies that he thinks are overvalued and have suspect financials. In other words: he hunts for looming stock market blowups resembling the infamous German zeppelin that crashed in New Jersey in 1937, my CNN Business colleague Paul R. La Monica writes.
Hindenburg’s track record: Anderson is best known for going after electric truck company Nikola last year. More recently, Hindenburg has targeted EV startup Lordstown Motors as well as fantasy sports company DraftKings.
The companies have vehemently denied most of Anderson’s allegations. But Nikola has since admitted that it faces a probe from the Securities and Exchange Commission, and Lordstown recently announced the abrupt resignations of its CEO and chief financial officer.
The backstory: Anderson worked for market data firm FactSet as well as several hedge funds before starting Hindenburg in 2018. He tells CNN Business he was often attracted to looking for frauds, money laundering and Ponzi schemes.
Now, he’s training much of his attention on “blank check” special purpose acquisition companies, or SPACs. Nikola, Lordstown Motors, and DraftKings all went public by merging with SPACs instead of pursuing standard initial public offerings.
“If you have solid financials and think your prospects are good you typically go public though the traditional route. SPACs tend to be highly speculative,” Anderson said. “I’ve yet to see a SPAC that I think is a good one but I am trying to keep an open mind.”
The naysayers: Critics accuse Hindenburg of trying to push stocks lower with its research reports to make a profit. The firm often actively bets against the stocks it investigates. Anderson says blowback comes with the territory.
“Some investors will have a visceral reaction to negative coverage,” he said. “I don’t agree with the criticism, but I support the right to be critical.”
Fed official warns of housing ‘boom and bust’
Readers of this newsletter are familiar with the exuberance that’s recently gripped the global housing market, sending prices past their 2008 peak and sparking fears of a dangerous bubble.
But it’s not just Before the Bell keeping tabs. In an interview with the Financial Times published Monday, Eric Rosengren, the president of the Boston Fed, signaled growing concern.
“It’s very important for us to get back to our 2% inflation target but the goal is for that to be sustainable,” Rosengren said. “And for that to be sustainable, we can’t have a boom and bust cycle in something like real estate.”
He added: “I’m not predicting that we’ll necessarily have a bust. But I do think it’s worth paying close attention to what’s happening in the housing market.”
The median existing home price in the United States in May was $350,300, spiking 24% from the same month last year, according to a report from the National Association of Realtors last week.
Remember: Experts have noted there are guardrails in place to prevent a 2008-style housing market collapse, including much tighter lending standards in the wake of the Great Recession.
But the Fed and other policymakers would be remiss not to keep close watch on skyrocketing prices — especially given that the central bank continues to purchase $40 billion worth of mortgage-backed securities per month, helping to keep borrowing costs artificially low.
Mobile World Congress kicks off in Barcelona. It’s the first major tech event to be partially held in person since the pandemic began.
Coming tomorrow: The S&P Case-Shiller Home Price Index arrives as policymakers closely monitor the hot housing market.