Resilient Cryptos: SEC Suits Fail to Stifle Trading

The SEC's regulatory crackdown on cryptocurrencies seems to be losing its grip on the 19 tokens that were labeled as unregistered securities in the agency's lawsuit against Binance and Coinbase Global Inc. back in June. Shortly after the lawsuit caused a market value drop of approximately $20 billion for these tokens, a surprising turn of events has emerged. These tainted cryptocurrencies are now witnessing a surge in trading volume, defying the initial impact of the legal action. According to data from CCData, their overall share of trading has risen by about two percentage points to reach around 13%. While the collective market value of these 19 tokens has experienced a roughly 20% decline since the lawsuits were filed, they are rebounding in terms of trading activity, even though some have been delisted from platforms like Bakkt, Robinhood Markets Inc., and Bitstamp. Curiously, the aftermath of a separate court ruling related to Ripple Labs Inc.’s XRP has contributed to mixed views on the classification of these tokens as securities. This uncertainty has enticed certain traders to take calculated risks with these potentially tainted assets. Market observers suggest that the trading of these "securities" is serving as a way to navigate the unclear regulatory landscape, seeking a sense of regulatory clarity amid the chaos. Kyle Doane, a trader at Arca, a digital asset investment firm, notes that "The tokens that have been named as securities are being traded as a proxy for regulatory clarity." He further points out that recent events, including the XRP ruling, have led to a worsening of regulatory clarity, which in turn has affected the price performance of these tokens. Notable among the tokens that were part of both Binance and Coinbase complaints is SOL, the native token of the Solana blockchain. Despite initially experiencing a 35% drop, SOL has managed to rebound by around 11%. However, ADA, the native token of the Cardano blockchain, hasn't been as fortunate, remaining down by approximately 20% since June 4. The attraction towards trading these tokens could stem from the possibility of greater price volatility compared to the broader market. This allure is particularly strong as Bitcoin, the leading cryptocurrency by market value, has been trading within a relatively narrow range for an extended period. Interestingly, these tainted tokens also maintain a robust following outside of the United States, where exchanges continue to support their trading. In fact, US-based exchanges only account for 10% of the total crypto trading volume, highlighting the global nature of cryptocurrency trading. Binance and Coinbase, the two largest exchanges globally and in the US respectively, have not yet delisted these tokens, further contributing to their continued trading. Jacob Joseph, a research analyst at CCData, observes that the impact of the SEC's lawsuit seems to be diminishing for these assets, stating, "While many tokens experienced a notable decline in price in the week following the lawsuit, many have since regained at least half of their drawdown." As the crypto market adapts to changing regulatory landscapes and investors seek opportunities within uncertainties, the trading resilience of these once-tarnished tokens serves as a testament to the dynamic nature of the cryptocurrency ecosystem.