Crypto: Cryptocurrency downturn over the weekend exacerbates the nervousness of investors who are already on the brink

abrupt weekend crypto The sell-off triggered by the slump in small digital tokens has sparked new investor anxiety after a week in which the U.S. Securities and Exchange Commission stepped up its crackdown on the sector.

Altcoins including Cardano’s ADA fell 25% on Saturday before offsetting the decline, while tokens including Solana’s SOL, Polygon’s MATIC and Avalanche’s AVAX saw double-digit percentage drops. Bitcoin, the largest digital asset, is down about 3% as of 11 am in New York. Runner-up Ethereum previously lost 5.6%, hitting its lowest level since the end of March.

The cryptocurrency market is known for big fluctuations on weekends when activity is usually lower and even small trades can have an impact. This time, investors were already on their toes after the SEC launched lawsuits earlier in the week against market leaders Binance Holdings Ltd. and Coinbase Global Inc., and has labeled many altcoins as non-registered securities, including SOL, MATIC, and ADA.

The nervousness was exacerbated by rumors that the fund had sold all of its holdings of such tokens. An image was circulated on Twitter showing a fake news article about the liquidation, although market analysts said there was little reason to believe the rumors were true. Further speculation about selling pressure around Robin Hood Solution Markets Inc. on Friday, ditching some altcoins from its platform also added to the negative sentiment.

Noel Acheson, former head of market analysis at Genesis Global Trading Inc., said there could be another reason for the price drop, such as a large holder or fund exiting their positions or trying to lower prices to cover short positions.

“Early Saturday morning UTC is not the best time to go out unless you really want to change the price,” Acheson wrote in her newsletter on Saturday. “Today’s move is not good news, and not just because of price cuts. It reminds investors how narrow the market is right now and how prices can be manipulated.”

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The designation of an unregistered security could make it difficult to trade in tokens if exchanges shy away from listing them for fear of irritating the SEC. On Friday, Robinhood said it would phase out Solana’s SOL, Cardano’s ADA, and Polygon’s MATIC as of June 27. is launching a very easy trade for people that people can take a preliminary position for,” said Spencer Hallarn, a derivatives trader at crypto investment firm GSR. “On top of that, there was a general liquidity drain from the market as some people cut their spending.”

Securities and Exchange Commission

The events of the past week included several important days of enforcement action against the crypto industry in the US. The SEC has accused Binance and its founder Changpeng Zhao of mishandling customer funds, misleading investors and regulators, and violating securities regulations. Binance called the actions of the SEC “disappointing” and said it intends to “resolutely defend its platform.”

Coinbase disputed the SEC’s assertion of an illegal exchange and said it was ready to take legal action all the way to the Supreme Court. BNB, a crypto asset that can be seen as an arbiter of sentiment towards its original creator Binance, fell more than 6% on Saturday, hitting its lowest level since last July.

While US regulators treat bitcoin as a commodity, SEC Chairman Gary Gensler has long stated that most other tokens are subject to the agency’s investor protection laws and that trading platforms must register with the regulator.

But labeling specific tokens represents a tougher approach, part of this year’s digital asset cap after the 2022 debacle and series of explosions, including bankruptcy FTX exchanges.

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