Saturday, April 13, 2024

Crazy Weekend for Crypto: Hurricanes of Selling Amid U.S. Regulations

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Last week, the U.S. Securities and Exchange Commission (SEC) successively announced legal actions against Binance and Coinbase, setting off a collective panic in the encryption community. Binance, the world’s largest encrypted asset exchange, was accused of mishandling customer funds and other crimes, while Coinbase was sued by the SEC for operating an illegal exchange.

Tighter U.S. regulations sparked a temporary exit from some of the industry’s biggest players, which turned into a sharp sell-off over the weekend.

Bitcoin fell 2.1% over the weekend, while ethereum lost about 5%. Some altcoins, which the SEC threatened to classify as unregistered securities, fell even more.

Blockchain platform Cardano’s native altcoin ADA fell 7.6%, Solana’s SOL fell 10.5%, Polygon’s MATIC fell 12.7%, and Avalanche’s AVAX fell 15.9%.

Altcoins have been in the spotlight since the SEC classified some tokens as securities in a lawsuit, Gordon Grant, co-head of trading at Genesis, said Saturday. And last weekend was a dark time for these altcoins.

Rumors of a big player exiting

Rumors swirled over the weekend that a fund was liquidating all of its altcoins, fueling jitters among cryptocurrency investors. But market analysts pointed out that there is no real evidence for the rumor and it is almost impossible to be true.

Noelle Acheson, former director of market insights at Genesis, believes the price drop could be triggered by large shareholders or funds exiting their positions, or someone trying to drive down prices to cover shorts.

On the other hand, last Friday, investment platform Robinhood said it would remove certain altcoin transactions on its platform, which made many crypto investors more deeply involved in speculation about the retreat of big players.

Robinhood said it would drop listings for Solana’s SOL, Cardano’s ADA and Polygon’s MATIC coins starting June 27. Users can still trade and hold these currencies before the deadline, but after the deadline, the remaining such currencies in the Robinhood encrypted account will be automatically sold at the market price, and the proceeds will be credited to the user’s account.

Spencer Hallarn, a trader at cryptocurrency investment firm GSR, commented that regardless of whether the physical tokens held by Robinhood change, the automatic settlement at the end of the month means that there is only one way for investors: sell. More importantly, liquidity in the market is tightening as many people reduce their token exposure.

Michael Safai, co-founder of Dexterity Capital, said that U.S. regulators have made it clear that they want to strengthen controls on cryptocurrencies in the United States. However, investors in the country need to be vigilant in increasing the pace of retreat, the market will become lighter, and volatility may also suddenly soar.