Smaller, lesser-known digital tokens such as Solana and Avalanche outperformed Bitcoin this week after a federal court decision in a case involving Ripple Labs Inc. fuels a “fear of missing out” impulse among cryptocurrency proponents.
(Bloomberg) — Smaller, lesser-known digital tokens such as Solana and Avalanche outperformed Bitcoin this week after a federal court decision in a case involving Ripple Labs Inc. fuels a “fear of missing out” impulse among cryptocurrency proponents.
An index comprising the bottom half of the top 100 tokens by market value climbed around 7.3%, even after many tokens pared large gains on Friday. Bitcoin, which accounts for about half the $1.25 trillion crypto market’s value, slipped less than 1% to around $30,200, though it reached a high for the year Thursday.
Altcoins were weighed down in the second quarter by the US Securities and Exchange Commission’s growing list of coins viewed as unregistered securities, a designation that can make those assets harder to trade. Bitcoin didn’t face a similar overhang, gaining 7% during the same period, because American officials view it as a commodity.
“A lot of buyers recognize that these altcoins have missed out on the rally, and that there’s some immediate upside to be had,” said Michael Safai, partner at quantitative trading firm Dexterity Capital. “There’s also a bit of FOMO in play; if the regulatory outlook brightens further, the conditions for a prolonged rally start to emerge.”
The SEC lawsuit against Ripple Labs has kept crypto on edge since 2020 by raising the prospect that digital tokens are securities that fall under the agency’s strict regulatory purview.
The judge in the proceedings ruled on Thursday that the XRP token linked to Ripple was a security when sold directly to institutions but not when offered to the public on exchanges. The industry rejoiced in the implication of potential limits to the SEC’s power to extend a crackdown on a sector it argues is replete with risky practices.
“With the determination that XRP is not a security, the market now assumes that most other altcoins won’t be classified as securities either,” said Jaime Baeza, CEO of crypto hedge fund AnB Investments.
XRP fell about 12% to around 71 cents on Friday. The token had surged 73% after the court ruling, and has doubled this year. It traded around $1.80 in April 2021.
One of the biggest beneficiaries from the optimism around the ruling was Coinbase Global, which saw its shares climb 34% on the week. Even with the increase, it was just largest jump since March for the stock of the biggest US crypto exchange.
Whether cryptocurrencies are securities has been a major question hanging over the industry, which has long fought efforts to regulate it by arguing that they are not. The SEC sued Coinbase in June for the sale of unregistered securities.
Share of other crypto-dependent companies also rallied, with MicroStrategy jumping 21% and Marathon Digital 15% since last Friday’s close.
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