Altcoins struggle. Fear reigns. U.S. regulators sued Binance and Coinbase (COIN.O) last week, devaluing most altcoins except bitcoin and ether.
Quite large. CDC data reports that the SEC considers 50 cryptocurrencies worth over $100 billion and 10% of the market securities.
Major players, including Solana, polygon, and Cardano, have fallen 23%–32%.
“Security classifications would affect all U.S. crypto exchanges, forcing various altcoin pairs to close,” K33 Research senior analyst Vetle Lunde said.
Whether or not U.S. courts accept the SEC’s classification, Robinhood Markets (HOOD.O) will remove Solana, Cardano, and Polygon from its platform. More conversations may follow.
Tokens would cost crypto exchanges extra to run.
“Securities can only be traded by brokers, on regulated exchanges, with clearing houses and transfer agents and physical certificates,” Bitwise Asset Management analyst Ryan Rasmussen said at the Reuters Global Markets Forum. “Exchanges would struggle to implement it.”
The SEC’s classification of blockchains like Solana and Cardano, which study decentralized finance and other applications, is expected to restrict investment.
“It could fundamentally hinder their ability to gain funding from the U.S,” said Lucas Kiely, chief investment officer of digital investing platform Yield App, adding that developer and user onboarding would certainly be affected.
Reuters reported that the Cardano and Solana Foundations disagreed with the SEC’s classification of their tokens as securities under U.S. law but looked forward to working with regulators to explain. No comment from Polygon Labs. Crypto’s key weapons survived.
The SEC’s lawsuit didn’t mention Bitcoin, ether, tether, and USC Coin.
Bitcoin and ether are still down 4.5% and 8% since the first SEC lawsuit a week ago, indicating investors are still apprehensive about crypto.
“The SEC has not said that BTC, ETH, or stablecoins generally are unregistered securities, and those assets account for at least 75% of crypto’s total market cap,” Galaxy Digital’s Head of Firmwide Research Alex Thorn said.
Investors can also find refuge in Bitcoin. Bitcoin’s market share grew to 47.6% from 45% before the case, according to CoinMarketCap.
According to crypto analyst Noelle Acheson, market data revealed long-term Bitcoin holders were holding steady.
Glassnode reported that under-5-month bitcoin traders made up 76.4% of deposit volume last week. 1.9% of deposit volume came from calm Bitcoin investors who held their money for over five months.
Cryptocurrencies’ price reductions may attract value-seeking investors, market watchers say.
Unlike bitcoin and ether, altcoin investment products saw small net inflows this year, according to Coinshares statistics released Monday.
“Altcoins…represent assets which remain in the much earlier stages of development compared to bitcoin, with investors willing to give them the benefit of doubt, holding on their investment, hoping they will come to fruition,” CoinShares analyst James Butterfield said.
