good morning. Here’s what happens:
Prices: Bitcoin plunged to $25.4K at one point after SEC sued crypto exchange firm Finans. Will markets recover?
Intelligence: stETH’s market cap is now the seventh largest among digital assets. What is behind this move and will it last?
SEC Lawsuit Rocks Crypto Markets
The latest blow to the crypto industry rocked digital asset prices on Monday.
Bitcoin was recently trading at around $25,750, down almost 5% in the last 24 hours. Much of its initial fall came two hours after the Securities and Exchange Commission (SEC) filed suit against the firm, accusing it of violating securities laws. The largest cryptocurrency by market capitalization was comfortably above $27,000 for most of last week, but the allegations against Binance rekindled fears about industry integrity and regulators’ intent to impose more control on exchanges. Finance — and other exchanges — have faced regulatory scrutiny for years.
“The Binance news obviously led to a big selloff, but the news itself wasn’t surprising,” Bob Ross, co-founder of Sologenic, a blockchain-powered network for tokenizing securities, told CoinDesk. “Rumours of impending action against Finans have been circulating for some time.”
But Ross said he doesn’t believe “we’re going to experience massive meltdowns” following the 2022 eruptions of Luna, Celsius and FTX. “Back then, we saw many compulsive sellers. I guess there aren’t as many compulsive sellers now as there used to be. I suspect we will gradually recover here.
Ether, the second-largest crypto by market value, recently changed hands below $1,800, while shedding more than 5% since Sunday. ETH and other major altcoins followed the same path as Bitcoin on Monday, with their wholesale declines coming in the hours immediately following the SEC filing. BNB, Binance’s exchange token, and SOL, Solana Blockchain’s own cryptocurrency, have recently fallen by more than 10%. ADA and MATIC, the tokens of smart contract platforms Cardano and Polygon, respectively, and the popular commemorative coin DOGE, were recently discounted by more than 8%. Litecoin, which has been rallying for the past few weeks, has also fallen over 9%. The SEC filing called those tokens unregistered securities.
The CoinDesk Market Index, a measure of crypto market performance, fell more than 6%. All six code-generating sectors, including DeFi, computing and culture and entertainment, stumbled into negative territory. Crypto fear and greed index remained neutral, as it has been for most of the year.
In a note to CoinDesk, Joe DePasquale, CEO of crypto fund manager BitBull, called the SEC lawsuit “unsurprising” but wrote that Ether’s exclusion from the filing was “a good sign.” He added: “As long as no major developments affect Binance’s activity, we don’t think the market has much more to lose.”
While broader equity indexes, including the tech-heavy Nasdaq Composite and the S&P 500, largely steered clear of the finance hubbub, industrial stocks slipped a fraction of a percentage point. Coinbase shares fell more than 5% immediately after the filing and were down more than 9% at market close. MicroStrategy ( MSTR ), which holds the most bitcoin on its balance sheet, fell more than 8.5%, Bitcoin miners Riot Blockchain ( RIOT ), Marathon Digital ( MARA ) fell more than 8%, and Bitfarms ( BITF ) fell. Above 7.4%. Safe-haven gold is trading below $1,980.
The case fallout permeated all corners of the crypto universe. As of Monday afternoon (ET), financiers experienced net outflows of more than half a billion, according to Doon Analytics. chart By crypto investment product provider 21Shares. Traders withdrew more than $1 billion in digital assets during the period, compared with $546 million in deposits, according to the chart. According to crypto data site CoinGecko, the +2% depth for BTC on Binance was $2.7 million, which Charles Storey, head of development at crypto index platform Phuture, told CoinDesk was “very low liquidity levels.”
Strahinja Savic, head of data and analytics at Toronto-based crypto platform FRNT Financial, noted in a Telegram note to CoinDesk that Binance has been running relatively smoothly since being 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 find one element of this story that actually turns things around.”
He added: “It’s important to remember that Binance’s regulatory issues do not involve Bitcoin. It’s hard for any traders to look at the SEC’s allegations and think they’ll do any harm to the Bitcoin bull thesis. However, given the amount of cross-networking in the space, combined with the exaggerated correlations, it’s no surprise to see Bitcoin sell off.
Sologenic’s Ross believes that if the U.S. Federal Reserve stops raising interest rates this month or in the summer, “we could regain some serious positive momentum.”
But he pessimistically noted that investors in this market “feel shaky and it will take time to restore confidence”. The SEC’s actions are pushing many crypto projects out of the US, and from this perspective, this is clearly becoming a net negative for the US economy and innovation.
According to data from CoinGecko, Lido’s stETH token is now the seventh largest token by market cap, ahead of Cardano and just behind XRP.
As the market has grown comfortable with staking, stETH has kicked out the ADA, and the market is looking for a staking solution that is not affected by US regulatory uncertainty.
All of this should be an endorsement of stETH, as there is significant institutional confidence in the staking mechanism behind it. As CoinDesk previously reported, rising demand for Ether staking led to a one-month wait of nearly 50,000 validators, especially following the Shabella upgrade, which spurred a deposit boom and influx of new market participants, with 19 million ETH locked up for staking. At the same time, analysts who spoke to CoinDesk continued to downplay fears of any kind of price collapse after the Shanghai update — and have been proven right — highlighting the balance between new stackers and withdrawals, inherent withdrawal limits, and mitigation. Effect of liquid stacking derivatives.
So stocking is a healthy market, and looks permanent. Lido dominates by a long shot, controlling 28% of the $13.4 billion market in total value, according to DeFi Llama data. And it’s a competitive market too; TVL has over 60 staking protocols worth over $1 million. of Lido The closet rival has $2.2 billion in TVL.
The only thing that could sink this ship is a high percentage gain in equity Ether. Right now it’s just 31%, but we’re only one bank failure away and a DeFi summer away from 50%. Will there be a rush to withdraw money then?
Bitcoin (BTC) is down nearly 2% in the past 24 hours to below $27,000, as JPMorgan issues a new report suggesting that retail demand for Bitcoin will remain strong ahead of the next halving event. eToro market analyst Josh Gilbert weighed in. Also, Christine Smith, CEO of the Blockchain Association, joined to discuss the group’s amicus brief filed in CoinCenter’s lawsuit against the Treasury Department and its sanctions watchdog. Also, check out the inaugural Consensus @ Consensus Statement.