Bitcoin (BTC) made new 2023 highs and other top cryptocurrencies also gained ground in November as the U.S. Securities and Exchange Commission and other global regulators continued to crack down on digital assets.

Investors have flocked to Bitcoin and other cryptos in recent months as investors anticipate the SEC could soon approve the first spot cryptocurrency exchange-traded fund to trade on a major U.S. exchange. However, regulators continue to clean up the cryptocurrency industry by targeting crypto exchanges and their high-profile executives, including FTX’s Sam Bankman-Fried and Binance’s Changpeng Zhao.

In addition, crypto investors are hoping the Federal Reserve has finally reached its terminal interest rate of the current tightening cycle and can navigate a soft landing for the U.S. economy in 2024.

November Crypto Market Performance

Optimism surrounding potential SEC approval of a spot crypto ETF pushed Bitcoin prices to new 52-week highs above $38,000 in November. Bitcoin prices pulled back from those highs in the closing week of November but were on track to finish the month above $37,300.

After rising as high as $2,135 in the month, Ethereum (ETH) prices were on track to finish November above $2,030 as investors hope a potential spot Bitcoin ETF approval would open the door for a spot Ethereum ETF as well.

Solana (SOL) rallied another 57% in November, boosted in part by comments by Ark Invest CEO Cathie Wood, who praised the crypto’s high speed and low cost relative to Ethereum.

Even after a significant year-to-date rebound, Bitcoin prices remain down more than 45% from their all-time high of about $68,790 in November 2021.

Bitcoin prices gained more than 8% in November and are about 120% year-to-date. Ethereum prices gained about 12% in the month and are up 56% overall so far in 2023.

Crypto Crackdown Continues

On November 2, disgraced FTX founder and CEO Sam Bankman-Fried was found guilty on all seven criminal counts charged against him tied to the collapse of FTX and sister hedge fund Alameda Research in late 2022. Bankman-Fried’s sentencing date is March 28, and he faces a maximum sentence of 115 years in prison.

Bankman-Fried’s crimes include wire fraud, conspiracy to commit wire fraud, conspiracy to commit securities fraud, conspiracy to commit commodities fraud and conspiracy to commit money laundering. The prosecution presented evidence that Bankman-Fried acted with criminal intent when he removed FTX customer funds and used that money to cover losses at Alameda and pay for other expenses, such as real estate and venture investments.

The prosecution’s key witnesses in the case against Bankman-Fried were former members of his inner circle, including his ex-girlfriend and former head of Alameda, Caroline Ellison, and his childhood friend and FTX co-founder, Gary Wang. Ellison and Wang both pleaded guilty to multiple criminal charges and agreed to cooperate as witnesses in Bankman-Fried’s high-profile trial.

Binance and Changpeng “CZ” Zhao

Just weeks after Bankman-Fried’s conviction, Binance founder and CEO Changpeng “CZ” Zhao resigned from his position at the exchange and pleaded guilty to criminal charges as part of a $4.3 billion settlement with the U.S. Department of Justice.

Much like Bankman-Fried, Zhao was once a charismatic, billionaire poster child of the cryptocurrency market boom. However, Zhao became the target of a multiyear federal investigation that culminated with federal charges that he and Binance violated the Bank Secrecy Act by failing to implement a sufficient anti-money-laundering program.

In addition, the Justice Department charged Zhao with violating U.S. economic sanctions and failing to implement proper controls on customer activity.

Binance itself has agreed to forfeit $2.5 billion to the government and pay a $1.8 billion fine tied to three criminal charges against the exchange.

Following his guilty plea, a federal judge ordered Zhao to remain in the U.S. until the court decides if he is a flight risk ahead of his sentencing hearing scheduled for February 23.

Further Crypto Difficulties

The SEC also issued new charges against crypto trading platform Kraken on November 20, accusing the company of operating an illegally unregistered securities exchange.

The SEC lawsuit against Kraken is similar to lawsuits the regulator filed against cryptocurrency exchanges Binance and Coinbase (COIN) in June. The Kraken case may hinge on whether or not a court finds the digital assets traded on the platform should be classified as securities, commodities or another asset type.

Maksym Repa, cryptocurrency analyst at Tomo Inc., says Binance’s settlement with the Justice Department was the biggest crypto headline of November and is actually good news for the platform itself.

“It cements Binance’s role as a leading industry figure, now bolstered by a restructured executive team aiming to evolve the company into a mature, compliance-focused financial institution. This progress not only reinforces Binance’s standing but also signals a shift towards greater regulation and compliance in the crypto sector,” Repa says.

Nigel Green, founder and CEO of deVere Group, says the conviction of Bankman-Fried and the resignation of Zhao are clear demonstrations to investors that the crypto market must and will be held to the same regulatory standards as the rest of the financial system.

“There can be no doubt that regulation of the crypto ecosystem is required and, I believe, it should be a priority,” Green says.

“The CZ news is a jaw-dropping blow in many ways, but this moment must now be used as a point of inflection to further shore-up the sector and instill trust and transparency by means of sensible, workable regulation as crypto continues its ascent.”

Other Crypto Headlines

At least nine asset management firms, including marquee players BlackRock, WisdomTree and Valkyrie, are still awaiting SEC rulings on proposals to launch spot Bitcoin ETFs, which would invest in the cryptocurrency itself rather than Bitcoin futures contracts.

Industry experts anticipate an official SEC ruling in early 2024. Digital asset investment products have experienced nine consecutive weeks of inflows heading into December as investors anticipate a spot Bitcoin ETF announcement that could be a major bullish catalyst.

Meanwhile, on November 1, the Federal Open Markets Committee opted to maintain its target fed funds interest rate at its current range of between 5.25% and 5.5%, choosing not to raise rates for its second consecutive meeting. Rising interest rates typically lower investor appetite for riskier assets, pressuring stock and cryptocurrency prices.

On November 16, the Federal Bureau of Investigation arrested three men and charged them with orchestrating a complex scheme that involved stealing more than $10 million from New York-area banks and attempting to launder that money by converting it to crypto.

Zhong Shi Gao, Naifeng Xu and Fei Jiang allegedly posed as victims of fraudulent money transfers, received reimbursements from the banks for the fake unauthorized transfers and used foreign cryptocurrency exchanges to launder their profits.

Mastercard (MA) blockchain and digital assets lead for Asia-Pacific, Ashok Venkateswaran, said in November that it may be difficult to get consumers to adopt a retail central bank digital currency (CBDC). In an interview with CNBC, Venkateswaran said consumers are “so comfortable using today’s type of money” that there “isn’t enough justification” to launch a digital version of the U.S. dollar issued by the Federal Reserve.

Crypto Catalysts Ahead

One major cryptocurrency market catalyst in December could be the Federal Reserve. In addition to announcing a decision on interest rates at its meeting due to conclude on December 13, the FOMC will presumably provide updated long-term economic projections. Those would likely include its expectations for how much interest rates could drop in 2024.

The bond market is pricing in a 64% chance the Fed cuts interest rates by May 2024, but a hot November jobs report or inflation reading could pressure the Fed to maintain interest rates at their current level for longer than anticipated.

John Glover, chief investment officer at Ledn, says the November crypto headlines about Bankman-Fried’s trial verdict, the resignation and guilty plea of Zhao and the Federal Reserve’s decision to pause interest rate hikes will become ancient history in December if the SEC officially approves the first spot crypto ETF.

“As this storyline has gained traction, volumes in spot, futures and options trading have all increased, as has the volatility of the market,” Glover says.

“An actual approval by the SEC for a Bitcoin ETF will undoubtedly dominate the headlines and many inches of print will be dedicated to predicting what this means for digital asset prices in the near term and in the long run.”