Traders are turning to three altcoin projects as the US Securities and Exchange Commission takes action against the crypto industry. Will SEC enforcement action be a glimmer of hope for relevant altcoin prices? Crypto expert Kyle White seeks an answer to this question.
SEC focuses on these altcoin issuers
cryptocoin.comAs you follow, the US Securities and Exchange Commission (SEC) has begun to increase its pressure on the crypto industry. The SEC’s recent sanctions actions have had a negative impact on crypto prices last week and earlier this week. The most recent SEC stablecoin foray came on Feb. 13 by issuing a Wells Statement to Binance USD (BUSD) issuer Paxos Trust Company. While Paxos denies that BUSD is a security that would exclude it from the SEC’s jurisdiction, some lawyers say the answer is not that simple. This raises fears that other top stablecoin issuers could be next, such as Circle’s USD Coin (USDC).
The SEC is also targeting centralized exchanges (CEX) by questioning how they can use client funds as qualified custodians. On February 15, a five-member SEC panel will vote on whether to make it harder for crypto companies to hold digital assets. Centralized staking platforms have also come under the SEC’s scrutiny, and the SEC believes these offerings are securities, as staking programs provide returns for investors. On February 9, the SEC began attacking these programs, reaching a $30 million settlement over Kraken’s earnings program. Interestingly, traders have not taken a full risk aversion position towards recent SEC activity and have turned to some decentralized solutions such as GMX (GMX), Lido (LDO), and Maker (MKR). Let’s take a closer look at what decentralized service providers are.
Maker’s DAI stablecoin leverages Paxos exits
After Wells Notice was sent to Paxos by the SEC, BUSD redemptions rose to $342 million in 24 hours. Redemptions from BUSD to Paxos burn the outstanding debt token. So while Binance says they continue to support BUSD, its market cap will drop over time as Paxos is banned from issuing new tokens.
As the decline slowed, the altcoin market cap dropped from $16.2 billion prior to the February 13 SEC announcement to $15.4 billion on February 14. The $15.4 billion market cap marks a monthly low for the third-largest stablecoin.
Making the decentralized DAI stablecoin in the immediate aftermath of the SEC’s enforcement action, Maker saw a surge in usage and fees. In a 7-day period, Maker fees rose 8.37% and skyrocketed to $667,000 in 24 hours on February 13.
The altcoin is the 10th best performing token on Coinecko when ranked by percentage returns, gaining over 8.8% in 7 days. Maker’s fees may continue to rise due to the uncertainty surrounding other major stablecoins like USDC following the SEC’s sanctions announcement.
This altcoin has reached an all-time high
GMX, the native token of the decentralized derivatives exchange GMX, benefited earlier when a major centralized exchange saw high outflows. GMX tends to see an increase in fees and token price. Within 24 hours of the February 13 SEC announcement, Binance net exits reached $788 million, with the price of GMX rising to an all-time high. On February 15, Binance saw another $535 million net outflow.
On February 10, GMX took the highest fees of all time, reaching $5.7 million. And with daily active users up 16.2% to 2,150, the exit from Binance could lead to continued growth for the budding exchange. Investors seem to be betting on the growth of GMX. This makes it the ninth best token for 7-day returns, up 12.9% on February 14.
Lido aims to gain market share in the coming months
After the SEC’s $30 million deal with Kraken, BTC and altcoin prices fell, while the LDO price rose. Within 24 hours of the February 9 SEC announcement, LDO rose 13.2% and investors seem to believe that Lido could repeat this action as it is the 12th top performing token with 7-day gains of 16%. In addition to the price increase, the use of Lido as a decentralized staking platform has skyrocketed, seeing $35.8 million in 30-day fees.
While Lido has not witnessed an increase in the average number of daily active users, the potential for future enforcement actions against Coinbase could translate into an increase in Lido’s market share among ETH stakers.
What is clear is that the recent array of SEC pressures on centralized staking, centralized exchanges and stablecoins is leading investors to position themselves in decentralized solutions such as GMX (GMX), Lido (LDO), and Maker MKR.
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