The Securities and Exchange Commission’s (SEC) crackdown on cryptocurrencies they class as securities may be acting as a stimulus, not a deterrent, to traders.
The two largest crypto traders, Binance and Coinbase, were sued by the SEC in June. The regulator alleged that they were responsible for operating unlicensed securities exchanges, collectively trading 19 coins that they determine to fit the definition of a security.
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The crypto market responded as is to be expected, wiping around $20bn from the combined market value in a matter of days. Bloomberg reports that although the total value of the coins in question has reduced by around 20% since the crash, their overall share of total trading volume has increased by 2%.
At the same time, Bitcoin’s 90-day volatility is at a seven-year low, and speculators have left the market in droves. This suggests that the large speculator class of crypto investors are being drawn to the less stable but potentially more profitable security-classed coins.
These kinds of traders are not necessarily good indicators of the sector’s health, however. Trading in a volatile market usually means an expectation of short holds or day trading, with an intention of leaving the market as soon as prices jump.
Speculators are therefore less likely to be worried about the long-term safety of their capital, as it is only held by the exchange for a short time. This may also explain the increase in trade volume as investors make a series of quick trades.
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By GlobalDataThe healthier sign is that, despite the SEC’s warnings that the two exchanges’ failures to register have stripped customers of vital protections, investors clearly remain bullish. GlobalData’s social media analytics suggest that among the select industry leaders included in the data, net sentiment on crypto and blockchain technologies has more than recovered since the crash.
52% of the daily posts on the topic were positive at the time of writing (16 August), up from a low of 31% in early June. This number jumps to around 60% amongst finance and blockchain experts. As blockchain regulation increases – particularly if creating new coins becomes more difficult – it is possible that there will be a shift in the crypto world from a market of high volatility to something more akin to the stock market.
This is good news for people who care about the technology behind the coins and see them as genuine decentralised alternatives to traditional finance and data storage methods, and bad news for get-rich-quick investors and companies.
Our signals coverage is powered by GlobalData’s Thematic Engine, which tags millions of data items across six alternative datasets — patents, jobs, deals, company filings, social media mentions and news — to themes, sectors and companies. These signals enhance our predictive capabilities, helping us to identify the most disruptive threats across each of the sectors we cover and the companies best placed to succeed.
