Cryptocurrencies Tainted by SEC Lawsuits Are Seeing an Increase in Trading

Olga Kharif, Bloomberg News

, Source: CCData

(Bloomberg) -- The impact of the SEC crackdown on crypto appears to be fading for the 19 tokens designated as unregistered securities by the agency when it sued Binance and Coinbase Global Inc. in June.

Just two months after the allegations of illegal securities sales erased about $20 billion of combined market value, the 19 cryptocurrencies highlighted are seeing an increase in trading volume. The tokens’ overall share of trading has increased by about two percentage points to around 13%, according to data compiled by researcher CCData.

Read an explainer of why crypto flinches when SEC calls coins securities

While the total market value of the 19 tokens has dropped about 20% since the suits were filed, they are trading more even after some were delisted by platforms operated by Bakkt, Robinhood Markets Inc., Bitstamp and others. Mixed views on the consequence of a separate court ruling involving Ripple Labs Inc.’s XRP over how to classify what is a security has some traders willing to gamble on the tainted tokens, market observers say.

“The tokens that have been named as securities are being traded as a proxy for regulatory clarity,” said Kyle Doane, a trader at Arca, a digital asset investment firm. “Since the XRP ruling, regulatory clarity has theoretically worsened, resulting in poor price action.”

Read more on the 19 tokens the SEC says are securities

Among the tokens included in both Coinbase and Binance complaints, SOL is now up around 11%. The cryptocurrency, which is the native token of the Solana blockchain, had initially dropped around 35%. Others such as ADA, the native token of the Cardano blockchain, haven’t recovered. The token is down around 20% since June 4.

One reason for the increased volume could be that traders are attracted to the possibility of greater price volatility than in the broader market. Bitcoin, the largest cryptocurrency by market value, has traded in a narrow range for months.

“A lot of people have been there since the beginning and continue to trade in and out,” said Gavin Michael, chief executive officer of Bakkt, which offers crypto custody, trading and other services.

The tainted coins also continue to enjoy a strong following overseas, where exchanges continue to support them. US-based exchanges only account for 10% of the total crypto trading volume, according to CCData. Binance and Coinbase, the largest global and US exchanges, respectively, haven’t delisted the tokens.

“While many tokens experienced a notable decline in price in the week following the lawsuit, many have since regained at least half of their drawdown,” said Jacob Joseph, a research analyst at CCData. “The impact of the SEC’s lawsuit appears to have been diminished for several assets.”