Spot Bitcoin ETFs see week of outflows, and SEC weighs up Ethereum as a security

DATA from CryptoCompare shows that the price of the flagship cryptocurrency Bitcoin, dropped slightly throughout the week, starting it at around $68,000 and dropping to a low near $61,000 before recovering, to now trade close to the $67,000 mark.

Ethereum’s Ether, the second-largest cryptocurrency by market capitalization, moved in a similar way, dropping from a $3,600 high to under $3,100 before recovering to now trade at $3,450 per ETH.

Headlines in the cryptocurrency space over the week largely kept on following the spot Bitcoin exchange-traded funds (ETFs) which saw record outflows over the last few trading days, with a net $888 million exiting these funds over the past week.

The decline in investor enthusiasm was accompanied by a record outflow day for Grayscale’s Bitcoin Trust (GBTC) on March 18, and by weaker inflows to leading Bitcoin ETFs including BlackRock’s iShares Bitcoin Trust (IBIT), which saw record-low inflows of $49.3 million on March 20, and dipped even lower to $18.9 million by March 22.

Fidelity’s Wise Origin Bitcoin Fund (FBTC) also saw lower inflows of as little as $2.9 million on March 21.

These outflows came amid a wider cryptocurrency market downturn that saw Nasdaq-listed business intelligence firm use to keep on accumulating the flagship cryptocurrency, adding an additional 9,245 BTC to its portfolio to bring its total holdings to over 1% of the cryptocurrency’s total supply.

MicroStrategy has disclosed to the US Securities and Exchange Commission its latest Bitcoin acquisition, marking its second substantial purchase within a little over a week. The company’s aggregate Bitcoin holdings now total 214,246 BTC, valued at upwards of $14 billion.

While price action was rather uneventful throughout the week, the price of Bitcoin on BitMEX’s XBT-USDT trading pair dropped to $8,900 in a flash crash after 500 BTC were sold for around $60,000 each, leading to significant slippage.

The downturn was intensified by a reduction in liquidity, in a crash that underscored the critical role of index pricing like CCData’s CCIX in helping maintain Bitcoin’s price stable and protect derivatives products.

SEC investigates Ethereum’s potential status as a security

The US Securities and Exchange Commission (SEC) is said to be investigating whether to classify Ethereum, the world’s second-largest cryptocurrency, as a security, having sent various companies subpoenas in relation to this investigation.

The regulator’s move has cast doubt on the crypto industry’s aspirations for the approval of spot Ethereum ETFs. The SEC’s inquiry involves requesting documents and financial records from companies concerning their interactions with the Ethereum Foundation, the Switzerland-based non-profit that manages the blockchain’s governance and development.

Sources aware of the subpoenas have indicated that the investigation was initiated following Ethereum’s transition to a Proof-of-Stake network in September 2022. An update to the Ethereum Foundation’s code repository hinting at an investigation by an unidentified state agency corroborate the existence of the probe.

Coinbase’s Chief Legal Officer, Paul Grewal, has challenged the SEC’s potential stance on spot Ether ETF applications, arguing the regulator has “no good reason” to deny these applications, and emphasizing the cryptocurrency is “a commodity, not a security.”

Grewal cited past statements from senior SEC officials, including former Director of Corporation Finance Bill Hinman, who publicly suggested Ethereum wasn't a security in 2018. Additionally, he referenced then-SEC Chair nominee Gary Gensler's Congressional testimony that same year, where Gensler also expressed the view that Ethereum isn’t a security.

Meanwhile, Ethereum competitor Solana has seen its transaction fees hit a new high amid a memecoin mania that has been growing on the network. Transaction fees soared to over 20,350 SOL worth over $4 million in a single day, eclipsing the previous record of $300,000.

Federal prosecutors seek 40-50 year sentence for FTX founder Sam Bankman-Fried

Federal prosecutors are pushing for a substantial prison sentence of 40 to 50 years for Sam Bankman-Fried, the founder of the collapsed cryptocurrency exchange FTX. Bankman-Fried was found guilty in November 2023 on seven charges of fraud and conspiracy related to the misappropriation of $8 billion from FTX clients.

The prosecution argued that Bankman-Fried’s actions had a devastating impact on “thousands of everyday people”, including those from war-torn and unstable nations who had entrusted their savings to FTX.

Bankman-Fried’s lawyer, Marc Mukasey, suggested a considerably shorter sentence of 5 to 6.5 years, asserting that most of the lost funds would ultimately be recovered by FTX clients and contending that Bankman-Fried did not set out to steal.

Over the week, a United Nations report also revealed that North Korean-linked cryptocurrency theft totaled $3 billion between 2017 and 2023, with the thefts being a primary source of funding for the country’s weapons program.

Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.