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SEC Crypto Action Causes Ripple Effect Across the Web3 and DeFi Industries

Between June 2022 and June 2023, crypto market capitalisation has dipped below the $1trillion mark, with regulations playing a massive part in this. To uncover the extent regulatory bodies have impacted it, DappRadar, a globally decentralised applications (dapps) store, compared how different coins have responded to regulations.

The crypto market valuation crash erased $40billion due to US regulatory unrest. However, Bitcoin and Ethereum have shown resilience amidst a 30 per cent altcoin value decline. DappRadar broke down five different factors impacting the market’s crash.

Web3 landscape shifts

The US has been a breeding ground for fintech innovation, with many organisations looking to establish a foothold in the country. However, recent actions from the US Securities and Exchange Commission have seen multiple exchanges choose to leave the country.

Notably, the SEC has launched lawsuits against Binance, the crypto exchange, and Coinbase, the most prominent US-based exchange. The regulatory body accused these platforms of offering unregistered securities. These included popular cryptocurrencies such as Solana (SOL), Polygon (MATIC), The Sandbox (SAND), and Axie Infinity (SAND).

This isn’t the first time Coinbase has been on the SEC’s radar. It had already received a Wells Notice before the lawsuit was launched in June. Therefore, tensions were expected between the SEC and the crypto exchange. However, according to DappRadar, Binance’s lawsuit left investors unsure of the future of the crypto market, leading to a sizeable sell-off.

The continued action by the SEC has caused some organisations to look to leave the country. Coinbase, following its Wells Notice, has hinted at moving its headquarters to Bermuda. The crypto exchange isn’t alone though, as fellow exchange Crypto.com, has also withdrawn from the US market. Andreessen Horowitz, the private venture capital firm which supports crypto, has also followed suit, moving its HQ to London.

Bitcoin remains resiliant

Following the tightened regulations, most cryptocurrencies’ value has dropped. However, one crypto that should be kept an eye on is Bitcoin.

Bitcoin’s price fell from $27,000 on 4 June to $25,000. However, according to data from Whalemap, there has been a significant spike in the number of unique addresses that have a balance of over 10,000 Bitcoin. Perhpas its due to Gary Gensler‘s, the SEC chair, vision that crypto is a commodity – but regardless, despite the price dip, Bitcoin’s is continuing to survive and grow.

Not all cryptos share the same fate 

The recent lawsuits against Binance and Coinbase have resulted in a significant shake-up in the altcoin market. Of the thirteen assets we analysed, FLOW and Chilliz (CHZ) faced the most severe blows, with losses of 41.60 per cent and 40 per cent respectively. This brought them more than 95 per cent below their all-time highs (ATH). This sharp downturn aligns with the inherent volatility of altcoins and reinforces the current narrative of Bitcoin’s escalating market dominance.

DEXs have felt the ripple effect

Decentralised exchanges (DEXs) have also felt the actions of the SEC. Take Stargate Finance and Uniswap for example. The former, known for its cross-chain liquidity protocol that simplifies asset transfers and swaps across blockchains, layer-2 networks, and dapps, saw a drop in wallet activity from 5-9 June. However, following this, its volume exceeded $1.6billion. before decreasing by approximately 53.98 per cent the following week.

Uniswap, the highest trading DEX, on the other hand saw seen a decrease in unique active wallets (UAW). Nonetheless, the platform’s trading volume has continuously risen. It recorded a cumulative volume of $16.68billion, reflecting the broader market conditions with crypto prices on a downtrend.

As Sara Gherghelas, a blockchain analyst at DappRadar, notes: “The recent regulatory events have unquestionably impacted the crypto and dapp landscape, prompting a significant market shakeup. With the crypto market capitalisation dipping below the $1 trillion mark, the effects of the ‘regulatory FUD’ have been starkly apparent.

“While these events have indeed presented the dapp industry with a challenging landscape, they also serve as a hard yet vital lesson. It is through such trials that the industry is pruned, allowing the most robust and resilient projects to weather the storm and ultimately prevail. This is yet another step in the ongoing journey of the crypto and dapp industries, a testament to their resilience and adaptability in the face of regulatory changes and market volatility.”

Author

  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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