The crypto landscape is shining bright again, with the market cap seeing an invigorating 2% bump within the past 24 hours. Some industry experts believe that recent SEC filings may actually bolster Bitcoin’s standing with investors.
Wednesday was marked by renewed optimism in crypto markets as traders brushed aside the regulatory issues surrounding two major players of the crypto exchange scene. This upbeat outlook hints at the resilient strength of key crypto assets.
The day saw Bitcoin (BTC) and Dogecoin (DOGE) leading the charge, rising by a noteworthy 5% within the last 24 hours shown on the crypto exchange such as Gate.io. Other major players including Litecoin (LTC), XRP, and Shiba Inu (SHIB) also rode the wave, leaping up by 4%. This collective upswing pushed the total crypto market capitalization up by 2%, reaching a staggering $1.43 trillion. At the time of writing, DOGE is trading at $0.079, whilst BTC is hovering above $37,900.
This surge offers a silver lining for traders, offsetting the fallout from Monday’s record liquidation event. During that tumultuous day, around $200 million worth of token-tracked futures products faced liquidation.
Details of the crypto market jump
When a trader can’t meet the margin requirements for a leveraged position, exchanges may have to forcibly close that position, triggering a liquidation. Massive liquidations often hint at significant price movements, providing savvy traders with a roadmap for potential market shifts. It also means that a large volume of assets has changed hands, prompting those with profits to trade further.
This revitalizing market rebound likely stems from traders shaking off the long-term repercussions of regulatory hiccups that have impacted the two US exchanges. A notable development involves some tokens being classified as securities, a category encompassing various financial instruments that carry financial value, such as stocks, bonds, or options.
On Monday and Tuesday, the U.S. Securities and Exchange Commission (SEC) filed charges against Binance and Coinbase for selling unlicensed securities, and offering staking as a service in the country. These charges came despite the lack of a concrete regulatory stance from the SEC on whether crypto tokens fall under the umbrella of securities. The SEC has yet to provide clear legal definitions or respond to a request from Coinbase for clearer regulatory guidelines.
Tokens like Solana’s SOL, Cardano’s ADA, and Polygon’s MATIC, which have been classified as securities in recent filings, also staged a recovery but were still trading with a modest 3% decline compared to Tuesday according to Gate.io crypto exchange. Observers speculate that major cryptos labelled as securities in the SEC filings could face some near-term volatility because it may just be that less people would be able to get their hands on them.
“We’ve witnessed a bit of a rough patch for altcoins. This likely stems from the SEC naming a slew of altcoins as securities while keeping bitcoin and ether in a different category,” shared one of the market participants via email. The analyst noted that many crypto traders seem to be gravitating toward the relative safety of top cryptos in terms of market cap. “It’s conceivable that we’ll see this divergence continue, with stalwarts like bitcoin and ether maintaining stability, but with more uncertainty for the majority of altcoins,” he added.
Interestingly, some suggest that these filings could bolster Bitcoin’s value proposition. The largest cryptocurrency, alongside the second-largest, Ether (ETH), was not explicitly defined as a security by the SEC. “The fact that the SEC didn’t single out bitcoin in its filings against Binance and Coinbase reaffirms the SEC’s previous position that bitcoin isn’t a security and hence not within the agency’s jurisdiction,” remarked another analyst in the conversation with Reuters.
Demystifying securities
What exactly are securities? In the world of finance, a security is basically like a fancy IOU. It’s a type of document that says you own a piece of something. It could be a piece of a company (like stocks), a piece of a loan (like bonds), or rights to ownership, such as options. In other words, it’s a proof that you’ve invested your money somewhere and you have a right to a return on that investment. It’s like holding a ticket to a concert – the ticket doesn’t get you the concert experience just yet, but it’s a proof that you’ve paid for it and have the right to enjoy the show when the time comes. So, when we’re talking about crypto tokens as securities, we’re discussing whether owning them gives you a similar kind of ownership or rights.
What are crypto securities?
According to news, a cryptocurrency is considered a security, it means that the ownership of the token gives you some kind of stake or investment in a project, much like owning shares in a company. Essentially, the token represents an investment contract, where you are providing money with the expectation that the efforts of others (like the project’s developers) will generate profits, and you’ll get a return on your investment.
This distinction is very important from a legal perspective. In the United States, for example, the Securities and Exchange Commission (SEC) regulates securities to protect investors. If a cryptocurrency token is classified as a security, the issuing company must comply with various regulatory requirements, such as registering the offering with the SEC and providing periodic financial reports.
For investors, the classification of a cryptocurrency as a security can offer some legal protections, but it also may impose restrictions, such as limiting who can invest and requiring more disclosures from the issuing company. Furthermore, it could impact the liquidity and overall trading of the token, as securities are typically traded on different platforms than other types of cryptocurrencies.