The cryptocurrency market experienced a downturn this week, with the total market capitalization dropping by 4.4% to hit its lowest point since June 14, at $1.02 trillion. This decline has been accompanied by an increase in Bitcoin (BTC) market dominance, as regulatory uncertainty weighs on the altcoin markets.
One of the factors contributing to the market’s decline is the ongoing delay in approving Bitcoin and Ether (ETH) exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC). Despite the hype surrounding these ETFs and endorsements from major players like BlackRock and Fidelity, the SEC has continued to postpone its decision, citing concerns over manipulation safeguards. This has disappointed investors who had high hopes for a BTC ETF approval. However, two companies, VanEck and ARK Invest, have filed for spot Ether ETFs, starting the countdown for the SEC to make a decision. The estimated deadline for this decision is May 23, 2024. While analysts believe ETFs are bullish in the long term, the market has not sustained short-term momentum.
Regulatory uncertainty and ongoing lawsuits have also contributed to the market’s downturn. The Digital Currency Group (DCG), which operates the Grayscale Bitcoin Trust (GBTC), is facing financial difficulties as one of its subsidiaries has amassed a debt of over $1.2 billion to the Gemini exchange. Additionally, Genesis Global Trading, a subsidiary of DCG, is suing its parent company over overdue loans, resulting from losses related to the Terra and FTX collapses. If DCG fails to meet its obligations, it could lead to forced selling of positions in the Grayscale Bitcoin Trust. Furthermore, the SEC has charged Binance, the largest cryptocurrency exchange, and its CEO, Changpeng Zhao, with misleading practices and operating an unregistered exchange. The legal status of Ether is also unclear, as there is no official clarification from the SEC on whether it is considered a commodity or security.
In addition to regulatory concerns, liquidations and low trading volumes have influenced the market’s decline. The start of September saw a surge in Ethereum leveraged liquidations, totaling $37 million in the first week alone. This wave of liquidations coincided with a decrease in the total value locked (TVL) in the crypto market and declining trading volumes. The market’s TVL reached a high of $53 billion on April 15 but has since dropped to $37.7 billion, reflecting a loss of over $15 billion. Some analysts attribute this decline to the strength of the U.S. dollar, which hit a six-month high on September 7, posing a potential risk to crypto assets.
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As the cryptocurrency market grapples with these challenges, the interplay between various economic factors and regulatory developments will continue to shape its trajectory in the coming months. It is important for investors to stay informed and cautious amid the ongoing volatility and uncertainty in the market.
Disclaimer: This article is for general information purposes only and should not be taken as legal or investment advice. The views expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.
