Despite the Securities Exchange Commission’s (SEC) efforts to classify numerous crypto assets as securities, the market seems to be treating them more like commodities. Recent lawsuits against Binance and oinbase">Coinbase have led to a significant decline in transfer volume and trading prices, indicating that the regulatory landscape for cryptocurrencies remains uncertain and subject to change in the coming months.
Over the past 24 hours, Bitcoin and Ether have experienced gains of 5% and 4%, respectively. Although Bitcoin declined by 5.4% on Monday, it does not rank among the top 50 largest one-day declines since 2021. Meanwhile, the altcoins named as securities in the SEC suits have seen little to no decline, with some even trading higher. This suggests that the market is not in agreement with the SEC’s classification of many cryptocurrencies as securities and that the SEC’s actions may be underscoring the significance of digital assets to crypto holders.
Are cryptocurrency organizations decoupling from the market?
Recent observations indicate that Bitcoin and Ether have deviated from traditional financial indices such as the S&P 500, and they seem to be deviating from crypto organizations as well. Their trajectory is now more in line with that of physical commodities, as opposed to the share price of oinbase">Coinbase. A comparison can be made with crude oil, which would not experience a significant decline in price due to the SEC’s legal action against ExxonMobil, nor would the value of gold plummet if the agency took action against the CEO of Barrick Gold.
Similar to physical commodities such as oil and gold, Bitcoin, Ether, and other digital assets seem to be operating under a similar rationale. These assets remain immutable, ever-present, and mostly unaffected by daily events. The primary factors that have impacted the prices of digital assets are supply and demand, similar to the physical commodity space. For instance, the reduction in Ether supply since September and macroeconomic factors impacting consumption have had a more significant impact on digital asset prices. In contrast, Bitcoin and Ether have not experienced a sharp decline following enforcement actions against exchanges, which contradicts the narrative that cryptocurrencies operate under a “greater fool” theory, wherein investors make money off an overvalued asset. Instead, investors appear to believe that the future of cryptocurrencies is bright.
Currently, the message conveyed by the crypto markets is as follows:
- Regulators have the ability to take action against oinbase">Coinbase and Binance.
- However, the intrinsic value of the asset remains unchanged.
It is important to note that oinbase">Coinbase and Binance are distinct from Bitcoin and Ether. These digital assets hold inherent value, and as long as distribution methods remain in place, the markets are willing to continue attributing value to them. Furthermore, investors are likely to perceive any attempt to eliminate these assets as an overreach, which would reinforce the notion that digital assets are valuable in the first place.
