Crypto markets were dealt another blow as they continued to retreat on Monday, albeit with values slightly above the lowest seen over the weekend, due to the increasingly stringent regulatory environment set by the U.S. Securities and Exchange Commission (SEC).
Leading cryptocurrencies were on the downturn, as bitcoin (XBT) dropped below the US$26,000 mark and ether (XET) slumped below US$1,750.
Last week, the SEC launched lawsuits against two major market entities, Binance Holdings Ltd. and Coinbase Global Inc. (COIN).
Furthermore, several altcoins, such as MATIC from Solana, Sol, and Cardano’s ADA, were targeted as unregistered securities.
Since June 4, an index formulated by CryptoQuant, tracking tokens designated as securities by the SEC, has plunged 28%.
This is significantly higher than a 4% dip in an index amalgamating Bitcoin and ether.
Post SEC lawsuits, these tokens have seen a staggering loss of roughly US$23 billion in market capitalization.
The digital asset industry is struggling to regain its footing amidst the regulatory crackdown in the U.S.
This has resulted in market participants reducing their holdings, observed Richard Galvin, co-founder of DACM, a digital asset-focused hedge fund based in Sydney.
While there has been a slight recovery post the weekend sell-off, but the markets remain highly volatile.
Last Friday, the Binance exchange announced that it would cease dollar transactions on its U.S. platform as its banking partners prepared to retract their support.
According to Nansen data, net outflows on the Ethereum blockchain from Binance have slowed to US$138 million in the last 24 hours.
Caroline Mauron, the co-founder of digital asset derivatives liquidity provider OrBit Markets, stated that while Binance’s net outflows are noteworthy, they’re nowhere near the levels observed during the FTX collapse in November.
According to Mauron, this indicates that Binance’s users still retain their trust in the platform.
An index tracking the 100 most significant digital tokens fell by 0.8%.
On Monday, CoinGecko data revealed a decline in the total cryptocurrency market capitalization to US$1.09 trillion.
According to DACM’s Galvin, the major contributing factor to the downturn are the recent SEC actions targeted at cryptocurrencies.
He added that the market cap seemed to resist dipping below the US$1 trillion mark.
The uncertainty surrounding the classification of cryptocurrencies is making investors jittery.
While bitcoin is viewed as a commodity by U.S. regulators, most other tokens are considered to fall under the SEC’s investor protection laws, according to SEC Chairman Gary Gensler.
This necessitates trading platforms to register with the regulatory body.
In addition, the decision of Robinhood Markets Inc (HOOD) to delist certain altcoins from its platform, just days after the SEC’s legal actions against Binance and Coinbase, further dented market sentiment.
Stefan von Haenisch, head of trading sales at OSL SG Pte in Singapore, noticed a shift in capital from altcoins towards bitcoin due to the latter’s increased dominance.
However, he mentioned that bitcoin seems to have near-term resistance at the US$26,000 mark.