good morning Here’s what happens:
Prices: Bitcoin dropped to $25.4K at one point after the SEC sued crypto exchange giant Binance. Will markets bounce back?
Statistics: stETH’s market cap is now the seventh largest among digital assets. What’s behind this move and will it last?
SEC Litigation Rocks Crypto Markets
The latest blow to the crypto industry rocked digital asset prices on Monday.
Bitcoin recently traded at around $25,750, down about 5% in the past 24 hours. Much of its initial slump came less than two hours after the Securities and Exchange Commission (SEC) filed suit against Binance, blaming the exchange giant for violating securities rules. The largest cryptocurrency by market capitalization hovered above $27,000 for most of last week, but the allegations against Binance have reignited fears about the industry’s integrity and regulators’ intentions to exert more control over exchanges. Binance – and other exchanges – have faced regulatory scrutiny for years.
“The Binance news obviously led to a big selloff, but the news itself was not surprising,” Bob Raz, co-founder of Sologenic, a blockchain-powered network for tokenizing securities, told CoinDesk. “There have been rumors of an impending action against Binance for some time.”
Raz added that he’s not convinced “we’re going to experience massive liquidations” similar to the 2022 Luna, Celsius and FTX explosions. “Back then, we saw a lot of forced sellers. I don’t think there are as many compulsive salespeople now as there were then. I suspect we are likely to gradually recover here.
Ether, the second-largest crypto by market cap, was recently trading below $1,800, down more than 5% since Sunday. ETH and other major altcoins followed a similar path as Bitcoin did on Monday, with most of their declines coming in the hours immediately following the SEC suit. BNB, the Binance exchange token, and SOL, the native cryptocurrency of the Solana blockchain, recently fell by more than 10 percent. ADA and MATIC, the tokens of smart contract platforms Cardano and Polygon, respectively, and the popular meme coin Dog, were off more than 8% recently. Even Litecoin, which has been rallying for the past few weeks, has fallen more than 9 percent. The SEC suit called those tokens unregistered securities.
The CoinDesk Market Index, a measure of crypto market performance, fell more than 6%. All six sectors that make up the index stumbled into negative territory, including DeFi, computing, culture and entertainment. The Crypto Fear & Grid Index remained neutral, where it has remained for most of the year.
In a note to CoinDesk, Joe DePasquale, CEO of crypto fund manager Bitbull, called the SEC suit “not surprising” and wrote that Ether’s exclusion from the filing was “a good sign.” He added: “Unless any major developments impact Binance’s performance, we don’t think the market will lose much.”
While broader equity indexes, including the tech-heavy Nasdaq Composite and the S&P 500, took a big hit from the Binance hubbub, industrial-focused stocks fell a few fractions of a percentage point. Coinbase stock fell more than 5% shortly after the filing was released and was off more than 9% at the market close. Shares of MicroStrategy ( MSTR ), which holds a large amount of bitcoin on its balance sheet, fell more than 8.5 percent, while bitcoin miners Riot Blockchain ( RIET ) and Marathon Digital ( MARA ) fell more than 8 percent, and BitFarms ( BITF ) fell. More than 7.4%. Safe haven asset gold is trading below $1,980.
The litigation seemed to spill over into every corner of the crypto universe. As of Monday afternoon (ET), Binance had lost more than half a billion in net outflows, according to a Dune Analytics chart by crypto investment product provider 21Shares. Traders withdrew more than $1 billion in digital assets during the period, compared to $546 million in investments, according to the chart. According to crypto data platform CoinGecko, BTC’s +2% depth on Binance is $2.7 million, which Charles Storey, head of growth at crypto index platform Phuture, told CoinDesk is a “very low liquidity level.”
In a Telegram note to CoinDesk, Strahinja Savic, head of data and analytics at Toronto-based crypto platform FRNT Financial, said Binance has continued to operate relatively normally since it was charged by the CFTC earlier this year. “US users have also been banned from accessing Binance for a long time,” he wrote. “It’s hard to really change one element of this story.”
He added: “It is important to remember that the Binance regulatory issues do not affect Bitcoin. Traders who think the SEC’s allegations will do any harm to the Bitcoin bull thesis are hard to think of. However, given the extent of cross-collateralization in the space, paired with exaggerated correlations, it would not be surprising to see Bitcoin sell off.
If the U.S. central bank pauses to raise interest rates this month or later this summer, “we’re likely to have some serious positive momentum,” Sologenic’s Raz believes.
But he pessimistically noted that it will take time to restore confidence, as investors in this market are “feeling jittery. The actions of the SEC are pushing many crypto projects out of the United States, and from this perspective, this is clearly turning out to be negative for the US economy and innovation in general.
According to data from CoinGecko, Lido’s stETH token is now the seventh largest token by market cap, just ahead of Cardano and just behind XRP.
stETH avoided the ADA because the market has grown comfortable with staking and the market is looking for a staking solution unaffected by US regulatory uncertainty.
All of this should be an endorsement of stETH, as it has significant institutional trust in the staking mechanism behind it. As CoinDesk previously reported, the growing demand for Ether staking led to a one-month wait for about 50,000 validators, especially after the Shappella upgrade, which led to an investment surge and the arrival of new market participants, locking up more than 19 million ETH for staking. At the same time, analysts who spoke to CoinDesk continued to downplay fears of any kind of price collapse after the Shanghai upgrade — and continue to prove correct — citing the balance between new stakers and withdrawals, underlying withdrawal limits and easing. Effect of liquid staking derivatives.
So stacking is a healthy market, seemingly forever. According to DeFi Llama data, Lido dominates it by a long shot, controlling 28% of the market, locking in $13.4 billion in total value. It is also a competitive market; TVL has 60 staking protocols with more than $1 million. Lido’s closet rival has $2.2 billion in TVL.
The only thing that can sink this ship is if a large percentage of ether is profitable. Right now it’s just 31%, but we’re only one bank failure and DeFi summer away from 50%. So will there be a rush to cash out?
Bitcoin (BTC) has fallen nearly 2% in the past 24 hours, falling below $27,000, as JPMorgan released a new report suggesting that retail demand for bitcoin will remain strong before the next halving. eToro market analyst Josh Gilbert comments. Additionally, Blockchain Association CEO Christine Smith joined to discuss the group’s amicus brief filed in a lawsuit CoinCenter brought against the Treasury Department and its sanctions watchdog. Also, a look at the inaugural Consensus @ Consensus report.