In the last few days, the cryptocurrency market has recorded a decrease in price due to the negative impact of macro factors, causing investors to feel nervous and reduce liquidity.
The price action in the cryptocurrency market is still trending down, as investors and businesses have become aware of the consequences of the lawsuit from the US Securities and Exchange Commission (SEC) against exchanges. Translating Binance and Coinbase.
These lawsuits have also negatively impacted the decentralized finance (DeFi) market by reducing total liquidity, and most analysts say more difficulties await the market.
Centralized Exchanges Pursued by the SEC
On June 5 and June 6, the United States Securities and Exchange Commission (SEC) filed a civil lawsuit against two of the largest centralized exchanges in the crypto space, namely are Binance and Coinbase. According to the SEC, 61 different cryptocurrencies, representing a value of $100 billion, are considered securities.
Among the 61 cryptocurrencies listed, there is a token called Algorand (ALGO). Notably in 2019, current SEC Chairman Gary Gensler praised Algorand as “great technology”. This creates a contradiction with the SEC’s latest enforcement action.
The enforcement actions have caused liquidity at Binance.US to drop 70% since the lawsuit.
In addition to the drop in liquidity, the Binance exchange has also seen a significant decline in the balances of stablecoins, Bitcoin (BTC) and Ethereum (ETH). The balance of stablecoins has dropped by more than 20% since June 5.
According to the news, Robinhood has decided to delist three of the crypto tokens that the SEC has listed as securities. This has created a difficult situation for users, and Robinhood has announced that it will allow users to withdraw assets or will be forced to liquidate within 2 weeks, with a deadline of June 26. This means that over $1 billion will likely be liquidated between the three cryptocurrencies shortly.
BITCOIN PRICE LOWER WHEN STOCKS UP
For now, the price of cryptocurrencies remains highly correlated with indexes like the Dow Jones and S&P 500. Most major banks still predict that the United States will experience a severe recession for a while. sometime in 2023. Even so, this hasn’t stopped the major stock indexes from continuing to hit yearly highs following the US debt crisis.
According to US Bank analysis incorporating more than 1,000 data points, investor sentiment about the current state of the economy remains low.
TVL AND VOLUME STILL LOW
The attack on centralized exchanges caused an increase in the inflow and outflow of Bitcoins on exchanges. Inflows into exchanges indicate an increase in selling pressure, while outflows show typical characteristics of self-custodial assets.
According to DeFiLlama, TVL across all protocols has dropped 0.5% in the last 24 hours and lost $120 billion since April 5, 2022.