Most major cryptocurrencies extended a decline on Wednesday, after the U.S. Securities and Exchange Commission sued both crypto exchanges Binance and Coinbase in the past two days.
Still, analysts said they don’t expect such regulatory actions to pose “existential risks” to crypto prices.
“Most capital that had to leave crypto is already out,” analysts at AllianceBernstein wrote in a Tuesday note. “Shallow liquid crypto markets in the U.S may continue in view of the U.S regulatory environment, but we don’t see this as an existential risk to crypto given the global presence of the industry,” according to the analysts.
Roughly 90% of crypto trading volume happens outside of the U.S., and “regulation seems to be evolving more favorably in U.K, Europe, and Asia,” the analysts added.
Coinbase
COIN,
+3.20%
and Binance together account for 70% of crypto trade volumes, according to data from Kaiko.
Bitcoin
BTCUSD,
+0.05%
fell about 1% over the past 24 hours to about $26,462 on Wednesday, recouping some losses after it on Tuesday plunged to the lowest level in almost three months. Ether
ETHUSD,
-0.26%
declined 1.3% over the past 24 hours and Binance Coin sank 7.9%, according to CoinDesk data.
While crypto prices have been in decline, bitcoin was outperforming most other major cryptocurrencies on Wednesday. Some investors have “fled” to bitcoin from other tokens, seeking safety in the ecosystem, according to Yuya Hasegawa, crypto market analyst at Bitbank.
Gary Gensler, chairman of the U.S. Securities and Exchange Commission, has repeatedly said bitcoin is the only cryptocurrency he would publicly label as a commodity.
In the Coinbase lawsuit, the SEC alleged that several tokens offered on the crypto exchange, such as Solana, Cardano, Polygon and Axie Infinity, are securities, and should fall into the agency’s jurisdiction.
For now, financial markets, including crypto, seem to be in a “wait and see” mode, ahead of the U.S. May consumer price data due next Tuesday and the Federal Reserve’s interest rate decision due one day after, Hasegawa noted. “We can expect suppressed volatility in the near term.”
From the technical perspective, $25,000 would be the most important support level to watch for bitcoin, according to Julius de Kempenaer, senior technical analyst at StockCharts.com. A drop below the level would make bitcoin “very vulnerable” to more downside price action, he added.
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