Good morning. Here’s what’s happening:

Prices: BTC was trading at $26.8K, but Oanda Senior Market Analyst Craig Erlam is skeptical that bitcoin’s price will rise significantly in the months ahead amid uncertain industry and economic news.

Insights: A number of crypto exchanges feature market makers. Do they create conflicts of interest? An FT story looks at’s market maker.

BlackRock has Buoyed the Market, but Bitcoin ‘Looks Vulnerable’

Both bitcoin and ether are beginning the Asia trading day in the green, with the world’s largest digital asset up 1.7% to $26,816 while ether is up 0.7% to $1,736.

While the market remains optimistic that BlackRock will be successful with its application for a bitcoin spot exchange-traded fund, Craig Erlam, a Senior Market Analyst with OANDA, said in a note that bitcoin still looks “vulnerable”.

“Bitcoin ended last week quite positively after dropping to three-month lows on Wednesday, but it continues to look vulnerable to further declines,” Erlam said. “The two-month trend is not in its favour, and the news flow isn’t exactly helping the situation either. It’s had a remarkable year and remains more than 50% higher, so it’s hardly a dire situation.”

Erlam still thinks there’s a bull case for bitcoin, it just hasn’t been realized yet.

The recent downturns, he argues, are simply a correction phase within an overall optimistic bull market.

“However, there’s little evidence indicating any imminent improvement, especially considering the Securities and Exchange Commission’s intensifying scrutiny of major exchanges,” he concluded.

Biggest Gainers

Biggest Losers

Should Crypto Exchanges Have Market Makers? has joined the club of crypto exchanges that operate an internal market maker, the Financial Times reported Monday.

Market makers are entities that use their own capital to facilitate the trade of tokens on exchanges by taking the counter position on a trade, allowing investors to rapidly exit positions without a counterparty at the other end. If exchanges didn’t have market makers, their liquidity would be considerably thinner on all but the largest tokens.

“We have an internal market maker that operates on the exchange, and that internal market maker is treated exactly the same as third-party market makers that identically facilitate tight spreads and efficient markets on our platform,” the company told the FT. “This is not a controversial practice.”

In the world of Decentralized Finance (DeFi), automated market makers are what allow platforms like Uniswap to exist.

By their nature, most crypto exchanges operate internal market makers. Famously, Binance has Sigma Chain and Merit Peak,which have been in the news recently. Disgraced FTX, had Alameda. Coinbase denies that it runs one.

Participants on the platform, including market makers, are treated equally,” also told the FT. “[The exchange] does not rely on proprietary trading as a source of revenue”.

Without having an internal market maker, it simply wouldn’t be profitable – or even perhaps possible – to list smaller cap tokens and expect a market to form around them. There just won’t be enough activity to quickly match buyers and sellers, making the bid depth unappealing to traders.

Some exchanges instead choose to allow external market makers to operate on their platform. Bullish, for instance, uses B2C2, as an example.

Operating internal market makers raises lots of possibilities for allegations of conflict of interest. Alameda was an investor in many of the tokens it traded as a market maker. Allegations that Sigma Chain or Merit Peak manipulates markets have yet to be proven in court.

Of course, this isn’t a great look for the industry. But it’s just how it works. So many retail equity trades operate in the same way – it’s just how the industry works. DeFi’s automated market makers perhaps are a better option, as they are algorithmic and open source, but even these can be accused of bias.

If really lied to outside parties, as the FT claims, about its market-making operations, then that’s a story. But as it stands, and as it said in its rebuttals to the FT’s questions, it’s just doing what everyone else does. Poor optics, yes, but welcome to crypto.

Important events.

9:15 a.m. HKT/SGT(1:15 a.m. UTC): The People’s Bank of China interest rate decision

8:30 p.m. H1HKT/SGT(12:30 p.m. UTC): U.S. Housing Starts (May)

CoinDesk TV

In case you missed it, here is the most recent episode of “The Hash” on CoinDesk TV:

“The Hash” hosts unpack today’s top stories: Binance’s French unit undergoes investigation by local authorities for the “illegal” provision of digital asset services and “acts of aggravated money laundering”. The exchange is also leaving the Netherlands after failing to acquire a license from the Dutch regulator. Separately, crypto lender Abra has been insolvent since at least March 31, 2023, state securities regulators alleged on Thursday. Plus, new documents obtained by CoinDesk under a Freedom of Information Law request, offer a rare but limited window into the reserves behind USDT. And, the latest on former President Donald Trump’s NFT project.

Do Kwon Sentenced to 4 Months Jail in Montenegro Document Forgery Case: The court has also ordered the confiscation of two Costa Rican passports, two Belgian passports and two identity cards belonging to Kwon and Terra executive Han Chang-Joon.

Hinman Documents Release in SEC-Ripple Case Is a Boost to Ether: JPMorgan: The documents are likely to intensify the move among major cryptocurrencies to become more decentralized and look more like ether, the report said.

Ethereum Developers Propose Raising Validator Limit to 2,048 Ether From 32 Ether: Low validator limits have led to waiting times of over one month, as of Monday.

Meme Coin BOB Tanks 45% After Elon Musk Calls its Twitter Bot Account a ‘Scam’: Musk had previously engaged with the Bob token bot several times, aiding a value rise.

UK Crypto, Stablecoin Laws Approved by Parliament’s Upper House: The Financial Services and Markets Bill stands to recognize crypto as a regulated activity and stablecoins as a means of payment under existing laws.

Edited by James Rubin.