What happened 

It's not unusual for the crypto market to swing wildly week to week, but this week was particularly chaotic. Regulators have been going hard after crypto firms in the U.S. and that could hurt demand for cryptocurrencies in the near term. But the market reacted positively. 

According to data provided by S&P Global Market Intelligence, as of noon ET Friday, Bitcoin (BTC 1.65%) has jumped 11.6% in the past week, Ethereum (ETH 0.82%) was up 9.6%, and Solana (SOL -0.18%) rose 9.7%. 

So what 

The regulatory actions were swift this week. The Kraken exchange's staking services were shut down, the New York Department of Financial Services ordered Paxos to stop minting BUSD stablecoins, and the Commodity Futures Trading Commission charged Vista Network Technologies and its CEO, Armen Temurian, with fraud. 

Speculation early in the week was that this crackdown would spill over to more established companies like Coinbase (COIN 0.58%) and Circle, the company behind the USDC stablecoin. But that doesn't appear to be the case yet. Coinbase has said its staking solutions are not securities and it's willing to fight that battle in court. 

The staking shake-up could impact Ethereum and Solana because they are proof-of-stake blockchains. But the problem regulators see doesn't seem to be proof-of-stake, but rather the rewards given to depositors. There's no clear guidance, but Kraken was offering a yield product and Coinbase is offering direct rewards based on Ethereum staking yield, which hasn't come under the same scrutiny. 

Late in the week, the SEC proposed an amendment to federal custody rules that would define what companies could hold customer cryptocurrency and which ones couldn't. It's not clear who would be approved or what cryptocurrencies would be approved, but at least this is a step in the right direction. 

It's also worth noting that China has been reported to show more interest in crypto recently. Tencent is starting to build Web3 and metaverse spaces and there are rumors Hong Kong will open up crypto buying and selling this summer. If China and Hong Kong open up to crypto, it'll bring new buyers into the market. 

Now what 

Certainty is usually better than uncertainty for the market, and that seems to be where crypto traders were leaning this week. The SEC and other regulators are going after crypto hard, but at least we may know the rules of the industry sometime soon. 

Inadvertantly, the regulatory crackdown makes the case for many of the decentralized use cases for crypto. Self-custody, decentralized security, and transactions that regulators can't block are part of the point of crypto. 

I don't know if this week's regulatory actions will be bullish for crypto or not, but the market thinks it is, and I do think it may force Congressional action in the U.S. eventually. That may be good long-term but it'll be a rocky ride getting to a point of stability, so don't be surprised if this week's move doesn't hold for long.