Crypto Resumes Drop After SEC Crackdown Led to Weekend Selloff

(Bloomberg) — Cryptocurrencies resumed losses Monday, though staying above their weekend lows, as last week’s regulatory crackdown by the US Securities and Exchange Commission weighed on sentiment.

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Bitcoin dropped 1.1% to $25,844 as of 2:55 p.m. in Singapore after tumbling as much as 3.9% on Saturday. Polygon’s MATIC slid 3.3% and Chainlink’s LINK dropped 2.7%. Both MATIC and LINK had slumped more than 10% Saturday.

The SEC launched lawsuits last week against market leaders Binance Holdings Ltd. and Coinbase Global Inc., and flagged a number of altcoins as unregistered securities, including MATIC, Solana’s SOL and Cardano’s ADA.

An index created by CryptoQuant that tracks tokens listed as securities by the SEC has tumbled by 28% since June 4, compared with a 4% drop in a combined index of Bitcoin and Ether. The tokens have lost around $23 billion in market capitalization since the SEC lawsuits last week.

Sentiment remains shaky in the digital-asset sector after the recent regulatory clampdowns in the US, spurring market makers to pull out funds, said Richard Galvin, co-founder at DACM, a Sydney-based hedge fund that invests in digital assets. “There was some bounceback after the overselling on the weekend, but markets are extremely fragile.”

Crypto exchange Binance said Friday its US-based unit will halt the use of dollars on the platform as banking partners are preparing to withdraw support.

The pace of withdrawals from Binance has slowed, and it saw $138 million in net outflows in the past 24-hours on the Ethereum blockchain, according to data from Nansen.

“Net outflows from Binance are not insignificant but still much smaller than what we saw in November during the FTX collapse, as Binance isn’t currently facing a crisis of confidence from their users,” said Caroline Mauron, co-founder of digital-asset derivatives liquidity provider OrBit Markets.

An index of the biggest 100 digital tokens declined 0.8%. The total crypto market cap slipped to $1.09 trillion on Monday, according to data from CoinGecko.

“Crypto specific factors are playing the main role given the recent SEC actions,” DACM’s Galvin said. “It seems like there is a resistance on the downside at $1 trillion market cap,” he said.

Regulatory uncertainty over the classification of crypto tokens is adding to investor jitters. While US regulators view Bitcoin as a commodity, SEC Chair Gary Gensler has said most other tokens are subject to the agency’s investor-protection laws and that trading platforms should register with the regulator.

Robinhood Markets Inc.’s decision Friday to drop certain altcoins from its platform just days after the SEC brought enforcement actions against Binance and Coinbase also weighed on sentiment.

“There is some rotation of capital from altcoins into Bitcoin given higher dominance of BTC,” said Stefan von Haenisch, head of sales trading at OSL SG Pte in Singapore. Still, “$26,000 for Bitcoin looks like immediate short-term resistance,” he said.