The recent claims by the US Securities and Exchange Commission (SEC) categorizing altcoins like $SOL, $ADA, and $MATIC as securities have significantly impacted their prices.
Since the beginning of June, these assets have experienced a collective market capitalization decline of 15%, amounting to a loss of $5 billion.
Despite these challenges, these altcoins rallied recently, and while this news has undoubtedly fueled investor optimism, the question of sustainability lingers.
SEC’s ‘Securities’ Label Puts a Damp on the Crypto Market
Among the cryptocurrencies mentioned in the lawsuits were Solana’s $SOL, Cardano’s $ADA, and Polygon’s $MATIC.
To understand the implications of the SEC’s declaration, it is important to grasp what it means for an altcoin to be classified as a security.
According to the SEC, security is a financial instrument representing ownership or investment in a company or project.
When a digital asset falls under this classification, it becomes subject to strict regulations and compliance requirements, which can have significant consequences for both the project and its investors.
Securities have to be registered with the SEC to be traded in the US. Exchanges offering unregistered securities in the US could be hit with massive fines.
This classification has led to uncertainty and increased regulatory scrutiny around these altcoins, resulting in significant price drops.
However, the foundations of these altcoins have responded to the SEC’s allegations, aiming to stabilize their prices and defend their classification as non-securities.
Although the crypto industry quickly criticized the SEC’s accusations as “unfair,” the affected tokens still experienced some negative impact.
Messari Crypto published its ‘Ecosystem Brief: Rollup Specialization’ report on June 12, just a week after the SEC filed the lawsuits.
In the report, Messari revealed that since the lawsuits were filed, the developing markets category, which encompasses several projects identified as securities by the SEC, has experienced a significant decline of 25%.
Furthermore, since the beginning of June, the securities mentioned in the SEC lawsuits have collectively experienced a loss of $5 billion, equivalent to a 15% decline in market capitalization.
Meanwhile, trading app Robinhood has decided to end support for Solana, Polygon, and Cardano following the SEC’s regulatory actions against the exchanges.
Breaking : #Robinhood has decided to end support for Cardano (ADA), Polygon (MATIC), and Solana (SOL) on June 27th, 2023 at 6:59 PM ET, after the US SEC determined that a large number of tokens on Coinbase and Binance were securities. #CryptoNews pic.twitter.com/N7pAbQMhVy
— Tickeriq (@tickeriq) June 9, 2023
This decision adds to the regulatory pressure surrounding these altcoins and raises concerns about their long-term viability.
Despite these challenges, some of these crypto assets are already showing signs of recovery.
These Altcoins Are Gaining Amid the Turmoil
Following SEC’s claim, investors were concerned that increased scrutiny and potential regulations would cause the value of altcoins to drop.
However, the market took an unexpected twist, as the prices of $SOL, $ADA, $MATIC, and other affected altcoins experienced a notable rally.
SOL Price Rises in the Past Hour
At press time, $SOL is trading at $16.69. This represents a downtrend of 1.34% in the last 24 hours and a drop of 18.46% in the last month.
However, the digital asset saw an uptrend in value of 3.42% in the last seven days and a 0.54% increase in the last hour.
$SOL’s 24-hour trading volume of $276 million also represents a 14.78% increase, signaling an ongoing rally.
The token’s current price trails below its 50-day simple moving average (SMA) of $19.49 for the short term and its 200-day SMA of $32.75 for the long term.
As a result, the price will likely fluctuate between the current price and the 50-day SMA.
In terms of technical analysis, $SOL has found support at the 23.6% Fibonacci retracement level of $16.33. If the rally continues, the asset may rebound from this point and reach new price levels.
Its relative strength index (RSI) stands at 45.46, indicating that $SOL is currently in an underbought zone. Meanwhile, the moving average convergence divergence (MACD) shows a weak buy signal.
The recent rally can be attributed to Solana’s mobile development efforts.
According to a report from Foresight News, the mobile phone known as “Saga” within the Solana ecosystem has undergone testing in China.
— FXScrypto (@FXScrypto) June 26, 2023
This crypto-ready mobile phone went live for public sale on May 8. Once activated, the Saga Web3 phone prompts users to create a new Solana wallet or link an existing one, securely storing the mnemonic in a local environment.
The review of this innovative development shows that Saga is a promising first step by Solana in creating a Web3 phone.
$ADA Rallies Amid Crypto Market Downtrend
At press time, $ADA is trading at $0.28, indicating a drop of 2.99% in the last 24 hours and 23.37% in the past month.
However, the asset has gained 6.68% in the past week, with a 3.65% increase in its 24-hour trading volume of $201 million.
The asset’s price falls below the 50-day simple moving average (SMA) of $0.34 for the short term.
$ADA’s price also trails below its 200-day SMA of $0.47 for the long term. However, the price movement will probably fluctuate between its current price and its 50-day SMA shortly.
Technical analysis also shows that the asset rebounded at the 23.6% Fibonacci retracement level of $0.26. However, the recent downtrend has caused $ADA to retrace downward toward the 23.6% FIB level.
Nevertheless, if a rally occurs, the asset may rebound from this point and reach new price levels.
The relative strength index (RSI) reading of 39.57 puts the asset in the underbought zone. Meanwhile, the moving average convergence divergence (MACD) displays a weak buy view.
In recent developments, Cardano has made significant progress with the launch of Node 8.1.1, which introduces crucial enhancements.
The new 8.1.1 cardano-node is an incredible improvement. As many SPOs are reporting, BCSH pools also missed ZERO slot leader checks this epoch. There's still a few things missed with this update, but this performance improvement cannot be overstated. @IOHK_Charles @InputOutputHK
— Andrew Westberg, NEWM CTO, BCSH, (@amw7) June 25, 2023
Node 8.1.1 primarily addresses concerns related to P2P/DNS and improves the overall performance of the node, especially during the epoch boundary.
The release of Node 8.1.1 holds great importance as it demonstrates Cardano’s dedication to refining its infrastructure and ensuring a seamless user experience.
$MATIC Gains Despite SEC Label
At press time, $MATIC is selling at $0.66, with a 24-hour trading volume of $248 million. This reflects a price increase of 1.14% in the same period.
Prior to this recent price increase, the asset experienced a decline in value of 27.58% over the past month.
However, the rise of 8.93% in the past week and 0.91% in the past hour indicate the potential for an upcoming rally.
$MATIC’s current price falls below its 50-day simple moving average (SMA) of $0.86 for the short term and its 200-day SMA of $0.97 for the long term.
The technical analysis shows that the asset has stalled at the 23.6% Fibonacci retracement level of $0.65.
However, a steady bullish rally could see the asset rise from this point to higher price levels.
The relative strength index (RSI) metric of 43.73 indicates that $MATIC is still underbought, and its moving average convergence divergence (MACD) displays a buy view.
Meanwhile, the engineering team at Polygon Labs has presented a proposal to enhance Polygon PoS by implementing zkEVM validium.
This decentralized Layer-2 solution utilizes zero-knowledge (ZK) proofs for security.
The advancement represents a significant breakthrough for the Polygon ecosystem, improving the security, performance, and integration of Polygon PoS within the Polygon 2.0 framework.
1/ Today a proposal was published to upgrade Polygon PoS to a zkEVM validium, a first-of-its-kind, decentralized ZK Layer 2.
As a zkEVM validium, Polygon PoS would inherit Ethereum's unmatched security, while preserving low fees & high scalability.
— Polygon (Labs) (@0xPolygonLabs) June 20, 2023
If the community approves this upgrade, it will mark an impressive technical achievement, which is the first instance of an established blockchain, particularly of this scale and significance.
It will also incorporate ZK proofs to operate as a Layer 2 solution.
Following the upgrade, the current validators of Polygon PoS will assume two crucial responsibilities, ensuring data availability and sequencing transactions.
This development is expected to positively impact the $MATIC token, and investors can expect the asset to keep up its rally.
Will the Tokens Sustain Their Rally in the Face of the SEC Clampdown?
While the recent surge in the prices of these altcoins is undoubtedly exciting for investors, there are uncertainties regarding the sustainability of gains.
As a result, it is crucial to consider the potential long-term implications of the SEC’s classification.
If regulatory scrutiny intensifies and stricter measures are imposed, the affected altcoins may face challenges related to compliance, liquidity, and market perception.
The cryptocurrency market is known for its volatility, and rapid price fluctuations are common occurrences.
Therefore, it is entirely possible that the current rally is a short-term surge, and a market downturn could follow in the coming weeks or months.
The sustainability of the rally in $SOL, $ADA, $MATIC, and the other altcoins will depend on various factors.
This includes regulatory developments, market sentiment, and the ability of these projects to deliver on their promises.
However, investors should exercise caution and conduct thorough research before making investment decisions.
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