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Bullish bounce for top cryptos after record-long liquidation event

09 Jun, 2023
bullish-crypto

Bitcoin (BTC) rebounded 8% on 7 June, recovering from recent losses and gaining back significant ground to trade around $26,000. The bullish move for Bitcoin was the vanguard for a broad crypto market recovery, as the sector as a whole added 3.3% to its overall capitalisation in 24 hours, rising to over $1.12 trillion. Particular beneficiaries included Dogecoin (DOGE), which rose 5%, as well as Litecoin (LTC), Ripple (XRP) and Shiba Inu (SHIB), all of which enjoyed gains of up to 4%.

Analysts in the crypto community are pointing to one likely factor behind the market boost, namely, the recent SEC filings regarding digital assets that could make Bitcoin and related cryptocurrencies more attractive to investors.

Recovery from liquidation

The midweek bullish reversal helped many crypto traders who had taken a heavy hit from Monday's events, which saw the liquidation of over $293 million worth of token-tracked futures as traders had their leveraged positions closed due to margin losses. Liquidations on this scale usually indicate the local top or bottom of a significant price movement and serve as a signal for traders to take appropriate action.

The SEC effect

The reversal followed statements earlier this week by the US Securities and Exchange Commission (SEC) concerning the regulation of US-based crypto companies that defined several altcoins — including Solana (SOL), Cardano (ADA) and Polygon (MATIC) — as securities. This definition, still contested, would turn digital assets into financial instruments with a value proposition similar to stocks, bonds or options. The SEC's argument is that cryptocurrencies as securities would fall under its jurisdiction and require its approval and licensing. On the other hand, crypto industry leaders are decrying what they see as an overreach of power that attacks top Web3 projects and potentially driving talent and innovation away from the US.

The SEC's claims have hurt the prices of the aforementioned altcoins but boosted the trading value of major cryptocurrencies that were conspicuously not mentioned in the filings (Bitcoin, Dogecoin, etc.) as investors become more confident that the regulator will not disrupt those assets.

As the original cryptocurrency and the one with the highest profile, the fact that the SEC is not going after Bitcoin is a strong sign of its robustness. This week's bullish trend shows that investors are confident about BTC being a secure store of value, safe from meddling by regulators.

Interestingly, XRP, whose parent company, Ripple, is engaged in a legal battle with the SEC over this exact definition, appears to be in a strong position as it was not covered by this week's filings.

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