Crypto weekend slump heightens investor jitters [Advance Cash ]

Crypto Weekend Slump Heightens Investor Jitters

SINGAPORE: A sharp weekend sell-off in crypto, led by a drop in smaller digital tokens, sparked a fresh wave of anxiety among investors, after a week in which a crackdown by the Securities and Exchange Commission (SEC) of the United States on the sector has grown in importance. pace.

Altcoins, including Cardano's ADA, fell 25% last Saturday before paring some of the decline, while tokens including Solana's SOL, Polygon's Matic and Avalanche's Avax, posted double-digit percentage declines.

Bitcoin, the biggest digital asset, fell nearly 3% in New York. The second-tier Ether lost more than 6% earlier to hit its lowest level since late March.

The crypto market is notorious for its big swings on weekends, when activity is generally lower and even small trades can have an impact.

This time around, investors were already nervous after the SEC launched lawsuits earlier in the week against market leaders Binance Holdings Ltd and Coinbase Global Inc and flagged a slew of altcoins as unregistered securities, including Sol. , Matic and Ada.

"Altcoins have been in the spotlight" since the SEC classified some of these tokens as securities in recent lawsuits, Gordon Grant, co-head of trading at Genesis, said in an interview last Saturday.

“Going into this weekend, as we were coming into this witch hour, these alts suddenly came under fire.”

The jitters were compounded by speculation that a fund was rumored to have sold all of its token holdings.

An image surfaced on Twitter showing a fake news article covering the sell-off, although market analysts said there was little reason to believe the rumor was true.

Further speculation of selling pressure around Robinhood Markets Inc's latest decision to remove some altcoins from its platform also fueled the negative sentiment.

Noelle Acheson, former head of market intelligence at Genesis Global Trading Inc, said there could be another cause for the price drop, such as a large holder or fund exiting their positions or an attempt to drive prices down to cover shorts.

“Early Saturday morning is not a good time to get out unless you really want to move the price,” Acheson wrote in his newsletter last Saturday.

“Today's move is not good news, and not just because of falling prices. This reminds investors of how tight the market currently is and how prices could be manipulated. »

A designation as an unregistered security could make the tokens more difficult to trade if exchanges are reluctant to list them for fear of irritating the SEC. Robinhood announced last Friday that it will be discontinuing Solana's SoL, Cardano's Ada, and Polygon's Matic starting June 27.

"It doesn't matter if the physical tokens held by Robinhood have moved or not, the fact that at the end of the month the tokens will be sold if they are not moved triggers a very easy trade for people to pre-position," Spencer Hallarn , derivatives trader at crypto investment firm GSR, said.

"On top of that, there was a general withdrawal of liquidity from the market as various people pulled out."

The events of the past week have featured a few memorable days of enforcement actions against the crypto industry in the United States.

The SEC has accused Binance and its founder Changpeng "CZ" Zhao of mismanaging client funds, misleading investors and regulators, and violating securities rules.

Binance called the SEC's action "disappointing" and said it intended to defend its platform "vigorously."

Coinbase disputed the SEC's allegation that it is running an illegal exchange and said it was ready to take the legal fight all the way to the Supreme Court.

BNB, a crypto asset that can be seen as the arbiter of sentiment towards its original creator Binance, fell more than 6% last Saturday to the lowest level since last July.

While U.S. regulators consider bitcoin a commodity, SEC Chairman Gary Gensler has long said that most other tokens are subject to the agency's investor protection laws and that trading platforms should s register with the regulator. —Bloomberg