13 June (Reuters) – It’s a tough time being an altcoin. Uncertainty reigns.
A slew of altcoins — a catch-all for most cryptocurrencies except bitcoin and ether — were harpooned last week in lawsuits filed by U.S. regulators against exchanges Binance and Coinbase (COIN.O), hammering token prices .
It is large. According to CCData, more than 50 cryptocurrencies with a total value of more than $100 billion and accounting for about 10% of the total market are now considered securities by the SEC watchdog.
Among the major players, for example, solana, polygon and cardano have dropped between 23% and 32%.
“Security ratings would affect all U.S. crypto exchanges, leading to a forced shutdown of several altcoin pairs,” said Vetle Lunde, senior analyst at K33 Research.
Whether US courts will accept the SEC’s classification remains to be seen, but the fallout is already being felt – Robinhood Markets (HOOD.O) has already said it will remove solana, cardano, and polygon from its platform. Market participants say other exchanges could follow suit.
That would make it more expensive for both individual tokens to operate and crypto exchanges to list them.
“Securities can only be traded through brokers, and only on regulated exchanges, and only through clearing houses and transfer agents and physical certificates,” Ryan Rasmussen, analyst at Bitwise Asset Management, told the Reuters Global Markets Forum. “It would certainly be a hurdle for exchanges to implement.”
The SEC’s classification is likely to spur investor interest in the blockchains that underpin tokens like solana and cardano, both notable chains for developing decentralized finance and other applications, market players say.
“It could fundamentally hinder their ability to get funding from the US,” said Lucas Kiely, chief investment officer of digital investment platform Yield App, adding that it would likely impact developer and user onboarding.
The Cardano Foundation and Solana Foundation told Reuters they disagree with the SEC’s classification of their tokens as a security under US law, but they look forward to working with regulators to get more clarity. Polygon Labs declined to comment.
QUIET ON THE BITCOIN FRONT
Crypto’s big guns have been surprisingly resilient.
Bitcoin and ether were not mentioned in the SEC’s lawsuit, nor were stablecoins such as tether and USC Coin.
Bitcoin and ether are still down 4.5% and 8% respectively since the first SEC lawsuit was filed a week ago, indicating that investors are still nervous about crypto.
“The SEC has not said that BTC, ETH or stablecoins are generally unregistered securities, and that those assets make up at least 75% of the total crypto market cap,” said Alex Thorn, head of Firmwide Research at Galaxy Digital.
Many investors also gravitate towards bitcoin in times of uncertainty as it is a relatively safe haven among crypto assets, and this time is no different. Bitcoin’s share of the cryptocurrency market rises from 45% prior to the lawsuits to 47.6%, according to data tracker CoinMarketCap.com.
Crypto-focused economist Noelle Acheson said market data indicated bitcoin holders were tight in the long run.
Among bitcoin traders, those who had owned the coin for less than five months were the most active in last week’s trading, accounting for 76.4% of deposit volume, according to analytics company Glassnode. In contrast, bitcoin investors holding their coins for more than five months seemed relatively calm, accounting for only 1.9% of the deposit volume.
And it may not be all doom and gloom for beleaguered altcoins, according to some market watchers who say their price declines could attract investors looking for value.
Investment products tracking altcoins have seen positive — albeit small — net inflows this year, in contrast to bitcoin and ether, Coinshares data showed on Monday.
“Altcoins…represent assets that are in the much earlier stages of development compared to bitcoin, with investors willing to give them the benefit of the doubt, holding on to their investment, hoping they will prosper,” said CoinShares analyst James Butterfield.
Reporting by Lisa Mattackal and Medha Singh in Bengaluru; Edited by Pravin Char
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