Yesterday the US Department of Justice, i.e., the US ministry that is responsible for justice, released an announcement regarding a major international action in the crypto sector.
The announcement was released through Reuters, and published in many of the major industry publications internationally.
US Department of Justice: fear in the crypto markets
With the release of this announcement there was immediate fear in the crypto markets, in part because two other pieces of bad news had been released yesterday.
In fact, after an upward opening, about an hour later the US stock markets had begun to fall, with the rest of the session all on a downward trend.
This was because the first bad news was really about macro data from the US economy, which was somewhat worse than expected and not good.
Such data dampened some of the enthusiasm, after some optimism had instead been spreading since 6 January.
In recent days, it seemed that the Fed might ease rates, if not even reverse them by year-end. Instead, yesterday’s data, coupled with some statements to that effect by some Fed officials themselves, suggested that it may still be too early to think about an easing of restrictive monetary policy.
About ten minutes later a second piece of news was released, which added fears about Ethereum in particular. In fact, the company that produces and manages the crypto wallet MetaMask, namely Consensys, announced a plan to lay off 11% of its staff.
This news had already been announced in recent days by some rumors, so in theory it might not even have any significant impact. Instead, it came out at a time when the markets were dominated by some fear, thus adding to the fears already circulating.
At that point, the price of ETH began to fall more, as compared to the price of BTC, and this was the case throughout the rest of the day.
The price retracement
But there was also another important dynamic going on that favored these two declines, and the next one due to the US Department of Justice.
From 6 to 14 January, which is nine consecutive days, prices in the crypto markets continued to rise, as sharply and rapidly as we have seen in a long time.
For example, the price of Bitcoin jumped from below $17,000 to above $21,000, but then that growth stopped. It has now been more than five days since the price hovered around $21,000.
In cases like this, many expect a retracement, or a sort of reverse bounce due to the fact that the growth was fast but then stopped.
In addition, those who had bought BTC in previous weeks at a price below $17,000 may want to sell and monetize, now that this small and brief uptrend seems to have momentarily stopped.
It should not be forgotten that the financial markets are dominated by short-term speculators, and it is not convenient for them to hold capital idle for too long.
So everything was ready for a descent, and all it took was a fuse to light it.
The crypto announcement by the US Department of Justice
Although the drop in the crypto markets, and the traditional markets, had already started half an hour ago, the release of the announcement of the major international action in cryptocurrency by the DoJ (Department of Justice) spread a kind of panic.
In fact, from the way it was announced it seemed to refer to a new restrictive policy toward cryptocurrencies, or a tightening of controls and punishments for those operating in the field.
Despite this, the drop in crypto markets was nevertheless contained, so much so that the price of Bitcoin fell only as far as below $20,400. This is a level already touched on 14 January after the first rise of the year above $21,000.
In short, nothing particularly strange, but what was really strange was what happened next.
The DoJ announcement stated that within an hour there would be a press conference to reveal what was the important international action in the cryptocurrency space.
The strange thing is that the press conference then revealed that this was hardly related the crypto markets, so much so that as soon as it began there was an immediate rebound that brought the price of Bitcoin back up to $21,000, undoing in a very few minutes all the losses due to the announcement.
The US Department of Justice’s international action against crypto
The DoJ is a ministry of the US government, and is supposed to operate only on the territory of the United States of America.
What they unveiled yesterday was that they organized an international action through cooperation with local authorities, particularly in Hong Kong, with one arrest occurring in Miami, Florida.
The action was directed against the tiny crypto exchange Bitzlato and its founder, Russian Anatoly Legkodymov. The charge is that of aiding and abetting money laundering by a China-based organization.
In reality this news in itself would have no particular significance for the crypto markets, but the DoJ still decided to announce the press conference as if it were an action against the crypto world itself.
It is possible that this strange choice is due to a desire to send a couple of signals to the crypto world.
The first is that the DoJ is aware that some crypto exchanges are being used to launder money, including internationally. And the second is that the DoJ is also cooperating with foreign authorities, such as those in China, to deal with the problem.
In fact, the crimes for which Legkodymov was arrested were not committed in the US, but in China and Hong Kong. However, Legkodymov was arrested in the US for violating US anti-money laundering regulations, on a DoJ warrant.
The DoJ’s official press release says they dealt a serious blow to the cryptocurrency ecosystem, and explicitly adds:
“Today’s actions send the clear message: whether you break our laws from China or Europe – or abuse our financial system from a tropical island – you can expect to answer for your crimes inside a United States courtroom.”
The reference to the FTX case is evident
The statement also adds that the National Cryptocurrency Enforcement Team made enormous efforts to be able to get to the point of shutting down Bitzlato and arresting Legkodymov.
The irony of the network
What has instead trickled down to investors, and those who have been following the story, is a story like that of the mountain giving birth to a mouse.
The DoJ announcement, and the subsequent statement, seem quite clearly to have overstated both the importance of this action and the efforts expressed by the DoJ to carry it out, perhaps for propagandistic and self-incentivizing reasons.
Indeed, the Internet, and Twitter in particular, went wild at that point.
Some mocked the DoJ for protecting Americans from the useless Bitzlato and not from FTX, Celsius and the like.
Summary of today’s DOJ announcement: pic.twitter.com/S22rYa6WAp
— Genia🔥 (@Genia_xx) January 18, 2023
Some wonder who the unknowns of Bitzlato are.
DOJ hyping an announcement in true crypto project style… pic.twitter.com/8G5qn9Ym1n
— Coin Bureau (@coinbureau) January 18, 2023
There are those who point out how much unnecessary hype has been created for such insignificant news.
The DOJ announcement today 😂💀 pic.twitter.com/eYZPiUys4u
— Sov ⚜️ (@King_Sov) January 18, 2023
There are even those who go so far as to speculate that the DoJ announcement, later revealed to be factually incorrect, could be considered a market disruption designed to artificially drive down prices.
It is possible that the DoJ actually did not care about the effects on the markets, but instead wanted to create some panic for those who use cryptocurrencies to circumvent anti-money laundering regulations. However, the affair remains anomalous, bordering on the ridiculous.
