On June 5, overall liquidations exceeded $280 million in just 12 hours as investor sentiment in the cryptocurrency market grew more alarming.
The amount of “anxiety” has dropped to a degree not seen since March 11, after Circle’s USD coin USDC temporarily lost its dollar peg, according to the Crypto Fear and Greed Index, a tool that gauges general market sentiment towards Bitcoin and the larger digital currency market.
In addition to that, the United States Securities and Exchange Commission (SEC) filed a complaint against Binance, its U.S. branch, and its CEO, Changpeng Zhao, which is what caused the market’s downturn on June 5.
For not registering as a securities exchange and conducting business unlawfully within the United States, the SEC filed a total of 13 allegations against Binance and its partners.
The index measures market mood by combining a variety of variables. To create an in-depth understanding of investor sentiment towards Bitcoin and the larger cryptocurrency market.
It does this by integrating variables such as fluctuation in prices, momentum, and trading volume with information from different sources such as Google Trends and social media networks.
SEC’s Recent Move Against Binance
The rapid decline in the cryptocurrency value amid the SEC’s most recent action against Binance is largely to blame for the unfavorable mood.
According to statistics from the Cointelegraph Price Index, top-tier cryptocurrencies like Bitcoin and Ether ETH have declined by 4.1% and 3.1% over the past 24 hours.
The bigger altcoins also suffered losses. Cardano ADA has decreased by 6.4% during the previous 24 hours as of June 5, whereas Solana (SOL) had decreased by 7.4%.
With almost $280 million in liquidations occurring since the lawsuit’s release, traders with open positions on the exchanges for cryptocurrency derivatives also experienced repercussions.
It should come as no surprise that investors who held open “long” positions—a leveraged wager on the rise in the value of crypto assets—were the worst impacted, making up $261.75 million (92%) of the total liquidations.
In the meantime, liquidations for traders who have held short positions totaled $20.7 million. About 43% of the losses incurred came from Bitcoin and Ether.
Increasing Legal Actions by the SEC
The SEC is now tightening its curb against the various top players in the crypto market in the wake of the collapse of FTX, a crypto trading exchange firm, leading to a massive wipeout of investor wealth.
As a result, there was a growing demand from investors and various legislators in the US to increase the overall scrutiny and check and balance on the crypto industry. It led to the involvement of the SEC which has been carrying out probes against various exchanges in the market.
Additionally, other countries have also decided to tighten their regulations on the crypto industry. Most notably, the European Union passed the markets in crypto-assets (MiCA) regulation while Japan has also introduced a new set of regulatory laws for the crypto industry.
Crypto Exchanges Threatening to Quit the US Market
As the actions from the SEC continue to take place, many of the crypto exchanges are threatening to quit the US market. While experts believe that this move is highly unlikely, it is an attempt to halt the advances made by the SEC and other regulatory authorities such as the DOJ (Department of Justice).
Most cryptocurrency exchanges have expressed their desire to move to countries or regions where there is more clarity regarding the regulatory laws. CEOs and top executives of various crypto exchange firms, such as Binance, Coinbase, etc., have hinted at shifting their operations to a different region.