Being an altcoin right now is challenging. Insecurity reigns.
The lawsuits brought by US authority against the bourses Coinbase and Binance in the past week have hammered the prices of a bevy of altcoins, a catch-all term for most cryptocurrencies aside from bitcoin and ether.
There is a lot of it. Based on CCData, the SEC watchdog currently views over 50 cryptocurrencies as securities, which together are valued over $100 billion and account for around 10% of the market.
Significant players, Solana, Cardano and Polygon, for instance, have fallen between 23% to 32%.
Security classifications would have an impact on all US cryptocurrency bourses, forcing the close of certain altcoin pairs, according to Vetle Lunde, a senior analyst from K33 Research.
The SEC's classification may or may not be upheld by American courts, but its effects have already been seen. For example, Robinhood Markets already announced that it would remove Solana, Polygon and Cardano from its system. According to market participants, other exchanges might do the same.
Both the operation of individual tokens and their listing on cryptocurrency exchanges would become more expensive as a result.
Securities will only be exchanged by brokers, only on those regulated bourses and only with transfer agents, clearing houses and physical share certificates, said Ryan Rasmussen, an analyst from Bitwise Asset Management. It would undoubtedly be difficult to implement exchanges.
Players in the market say that the SEC's classification is expected to hit investor interest for the underlying blockchains of tokens like solana and cardano, two prominent chains for creating decentralized finance and also other applications.
According to Lucas Kiely, the chief investment officer from Yield App, a digital investing platform, it could fundamentally hamper their capacity to gain funding from the US. He said that this would probably have an effect on the on-boarding of developers and consumers.
Bitcoin news has been quiet
Big guns in Crypto were unexpectedly resilient.
Stable coins like USC Coin and Tether , as well as Ether and Bitcoin, were not mentioned in the SEC's case.
Thought investors are still uneasy about cryptocurrencies, as evidenced by the fact that both ether and bitcoin still decrease by roughly 4.5 percent and 8 percent, respectively, after the first SEC action took place one week ago.
According to Alex Thorn, the director of Firmwide Research from Galaxy Digital, Bitcoin, Ethereum and stablecoins make up at least 75 percent of the overall market capitalization of cryptocurrencies, despite the SEC having not declared them to be generally unregistered securities.
Because many investors view bitcoin as one of the more secure crypto assets, this time should be no exception. Investors frequently turn to bitcoin when markets are unsettled. According to the data aggregator CoinMarketCap.com, Bitcoin's market share of cryptocurrencies increased from 45 percent to 47.6 percent as a result of the lawsuits.
Noelle Acheson, an economist specializing in cryptocurrencies, claimed that long-lasting bitcoin holders were holding tight based on market data.
According to the analytics company Glassnode, the most proactive bitcoin traders last week represented 76.4 percent of the deposit volume and had an average holding period of under five months. Contrarily, those who kept their bitcoin investments for over five months looked to be more relaxed and made up just 1.9 percent of the total volume of deposits.
And not all is lost for the troubled altcoins, argue some market observers who claim that their price drops may be luring investors looking for bargains.
In comparison to ether and bitcoin, investment products that track alternative currencies have experienced positive, albeit modest, net inflows for this year, according to Coinshares statistics released on Monday.
James Butterfield of CoinShares said that altcoins represent assets which are still in very early phases of development, and investors are ready to offer them benefit of the doubt by sticking onto their investment in the hopes that they can finally succeed,