13-6-2023 (NEW YORK) The altcoin market is experiencing a turbulent period as a wave of lawsuits filed by U.S. regulators against major exchanges Binance and Coinbase has taken a toll on altcoin prices.
Numerous altcoins, referring to cryptocurrencies other than bitcoin and ether, have been targeted by these lawsuits, resulting in a significant drop in token values. According to CCData, over 50 cryptocurrencies with a combined worth of over $100 billion, accounting for approximately 10 percent of the overall market, are now classified as securities by the SEC watchdog.
Well-established altcoins like solana, polygon, and cardano have seen their prices plummet by as much as 23 to 32 percent in response to the legal actions.
“Security classifications would impact all U.S. crypto exchanges, potentially leading to the delisting of various altcoin pairs,” warned Vetle Lunde, senior analyst at K33 Research.
The acceptance of the SEC’s classification by U.S. courts remains uncertain, but the consequences are already being felt. Robinhood Markets, for instance, has announced the removal of solana, cardano, and polygon from its platform, and other exchanges may follow suit.
Such a move would result in higher operating costs for individual tokens and increased listing fees for crypto exchanges.
“Securities can only be traded by brokers, on regulated exchanges, with clearing houses, transfer agents, and physical certificates,” explained Ryan Rasmussen, analyst at Bitwise Asset Management. “It would certainly be a hurdle for exchanges to implement.”
Market participants anticipate that the SEC’s classification will negatively impact investment interest in blockchain networks underlying tokens like solana and cardano, which are known for their development of decentralized finance and other applications.
“It could fundamentally hinder their ability to secure funding from the U.S.,” noted Lucas Kiely, chief investment officer of digital investment platform Yield App. He added that this would likely have implications for developer onboarding and user adoption.
The Cardano Foundation and Solana Foundation expressed their disagreement with the SEC’s classification but expressed willingness to collaborate with regulators to gain more clarity. Polygon Labs declined to comment on the matter.
BITCOIN REMAINS STURDY
Surprisingly, major cryptocurrencies have shown resilience in the face of these challenges.
Bitcoin and ether were not directly implicated in the SEC’s lawsuits, nor were stablecoins such as tether and USC Coin.
While bitcoin and ether have experienced slight declines of approximately 4.5 percent and 8 percent, respectively, since the lawsuits were filed, investors continue to approach these assets with caution.
“The SEC has not stated that BTC, ETH, or stablecoins are unregistered securities, and these assets still account for at least 75 percent of the total crypto market cap,” explained Alex Thorn, Head of Firmwide Research at Galaxy Digital.
During times of uncertainty, many investors turn to bitcoin as a relatively safe haven within the crypto market, and this situation is no exception. Bitcoin’s dominance in the cryptocurrency market has increased from 45 percent to 47.6 percent, according to data from CoinMarketCap.com.
Crypto economist Noelle Acheson observed that long-term bitcoin holders appear to be holding their positions amidst market volatility.
Among bitcoin traders, those who have held the cryptocurrency for less than five months were the most active in last week’s trading, accounting for 76.4 percent of deposit volume, as reported by analytics firm Glassnode. On the other hand, bitcoin investors who have held their coins for over five months seemed relatively unfazed, accounting for just 1.9 percent of deposit volume.
For struggling altcoins, there may be a glimmer of hope as some market observers believe that the recent price declines could attract value-seeking investors.
Data from CoinShares showed that investment products tracking altcoins have experienced small net inflows this year, in contrast to bitcoin and ether.
“Altcoins represent assets that are still in the early stages of development compared to bitcoin, and investors are willing to give them the benefit of the doubt, holding onto their investments in hopes of future success,” said CoinShares analyst James Butterfield.
