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Takeaways:

  • Bitcoin is leading the cryptocurrency market's recovery after Monday's sell-off, with a 5.8% increase.
  • One analyst suggests that Bitcoin (BTC) could see a positive impact as investors shift away from altcoins. This comes after the SEC's recent lawsuits against Binance and Coinbase, which deemed multiple tokens as unregistered securities.

Cryptocurrency prices bounced back on Tuesday, spearheaded by bitcoin (BTC), following a significant decline caused by the U.S. Securities and Exchange Commission (SEC) filing a lawsuit against Binance. This recovery occurred despite another lawsuit targeting Coinbase, a rival of Binance.

The leading cryptocurrency in terms of market capitalization has recently experienced a remarkable surge, surpassing $27,000, representing a nearly 6% increase over the last 24 hours. However, on Monday, BTC's value dropped to around $25,400 as investors, who were already apprehensive due to several incidents involving digital assets in the past few months, decided to abandon the cryptocurrency market following the Securities and Exchange Commission's announcement that Binance had breached securities regulations.

The broader cryptocurrency market also made a recovery since Monday, although not as strong as BTC. ETH, the second-largest cryptocurrency in terms of market value, was trading slightly below $1,900, reflecting a 4.5% increase from Monday's level. ADA and SOL, the tokens of the smart contract platforms Cardano and Solana, experienced a rebound of over 1% after experiencing significant drops of more than 8% and 10% respectively. Binance's BNB native token also showed positive movement, while Polygon's MATIC decreased by 1%. These tokens, along with nine others, were classified as unregistered securities by the SEC in the two lawsuits.

The Coindesk Market Index (CMI) has recently experienced a 4.5% increase in value, as it tracks the price of a diverse range of tokens.

Bitcoin is benefitting

Significantly, the Securities and Exchange Commission (SEC) deliberately omitted any reference to BTC and ETH in its legal actions directed at Binance and Coinbase. This omission brings reassurance to investors, indicating that U.S. regulators recognize both tokens as commodities.

In a market report published on Tuesday, Vetle Lunde, a senior analyst at crypto research firm K33 Research, characterized the initial sharp decline of BTC following the Binance lawsuit as an excessive reaction.

“Bitcoin is classified as a commodity,” Lunde wrote. “Americans can purchase BTC through a plethora of exchanges, exchange-traded funds, payment apps, and more. Liquidity could consolidate further towards Coinbase and Kraken, but the market should not crash 5% on these developments.”

In a separate market analysis, Edward Moya, a senior market analyst at the trading platform Oanda, expressed the view that the Securities and Exchange Commission's (SEC) crackdown on alternative coins (altcoins) might actually work in favor of bitcoin.

“​​Bitcoin is becoming an interesting trade here as many crypto investors might just decide to give up on most altcoins and stick with what has worked best since cryptos were created,” Moya wrote. “With the SEC naming Solana, Polygon, Cardano, and BNB as securities, some traders might decide to abandon those positions on any major exchange, switch the position to a cold wallet, or just close out their position and reopen a bitcoin one.”