Bitcoin Rejected at $26K For a Consecutive Red Weekly Close, Alts Settle After Sharp Correction

Bitcoin (BTC) traced a sudden mild slump heading into the weekend as the majority of altcoins took a much heavier beating. The flagship cryptocurrency fell sharply from $26,700 on Friday mid-morning, bouncing off the $25,483 mark in the wee hours of Saturday.

Altcoins faltered over the weekend

Altcoin prices saw a much more significant drop, with notable ones like Polygon (MATIC), Solana (SOL), Polygon (MATIC), Cardano (ADA), Eos (EOS), and Dash (DASH) losing as much as 20% ahead of the weekend. The weekend dip added to unsettling events in a chaotic week in which the US markets regulator, the Securities and Exchanges Commission (SEC), named almost a dozen tokens as securities in its lawsuit against Binance last Monday. The SEC expanded the list with six more tokens in a complaint lodged against Coinbase on Tuesday.

The flagship asset brushed off the dip in an attempt to retake $26,000 on Sunday afternoon but faced harsh rejection slightly above the level. The waning momentum in the late evening hours set the BTC/USD pair on a path for a second weekly close. Coinglass data shows Bitcoin recorded a 4.32% loss across the just-concluded week (Wk. 23), adding to another 3.46% red candle across Wk. 22. Bitcoin was last spotted trading at $25,850 on Monday.

On-chain records show that millions worth of Polygon (MATIC) appeared to be moved by major market makers like Cumberland to crypto exchanges on Friday night ahead of a nearly 30% drop. Blockchain analytics firm LookOnChain observed that the latter deposited around 14 million MATIC tokens to Binance and Coinbase in a 9:5 ratio. Some analysts pointed out that the massive volume involved partially contributed to the plummeting altcoin prices amid the illiquid environment.

Thin liquidity is typically associated with more volatility forming a basis for projections of major price upswings in reaction to upcoming macro events – US CPI data release for May on Tuesday and the Federal Reserve rate decision on Wednesday.

Markedly, the recent display of crypto markets retracing has been attributed to several bearish narratives in both macro and micro contexts.

Different narratives take over the market

In a June 10 tweet, Binance CEO Changpeng Zhao dismissed some of the potential price catalysts floated by market commentators. CZ spurned some of the false narratives like “Binance converting its holdings to fiat,” which he dismissed, noting that the reality “Binance fiat/stablecoin reserves (used to pay for short-term salaries or expenses) decreased, but crypto reserves increased” in recent weeks.

“Why is the market going up or down? No one really knows. A lot of people claim to know, and can often pin it on a single (often wrong) reason. In reality, there are many sellers and buyers in a market, everyone may have their own reasons.” he wrote.

He further dismissed the price crash as being due to Robinhood’s Friday announcement of ending support for Solana, Cardano, and Polygon tokens on its platform effective June 27. The online brokerage firm said token balances still held in the user’s account past the specified date will be automatically traded at market prices. The Binance CEO also ruled out the market-wide sell-off being due to macro influences in play, especially in the US and Asian markets.

Markets analysts Rekt Capital warned of a “relief rally” and “additional downside” in the price of Bitcoin following the loss of support at the 200-week moving average (MA).

Bitcoin dominance and token roundup

Friday’s total liquidation volume of $423 million (longs accounting for $348 million) exceeded a similar volume of trader orders liquidated earlier this week, setting a new nine-month record.

Cardano (ADA), Polygon (MATIC), and Aptos (APT) have recovered modestly on Monday and are among the day’s top gainers. Binance (BNB) is also one of the trending tokens today, having been severely affected since the start of last week.

The BNB/USD pair has continued hemorrhaging into the new week and was last spotted at $225, down 5% on the day. Markedly, the decline in BNB prices triggered a surge in the Open Interest in BNB futures which has swelled more than 27% in the past week to a 5-month high on Monday, Coinglass data. The soaring Open Interest in the token implies an increase in short positions, cementing a downtrend outlook for the token as does the negative funding rates in the perpetual futures market.

Algorand and Flow, which set new all-time lows of $0.096 and $0.435 during the weekend market action, have recovered swiftly to $0.11 and $0.51, respectively. ALGO and FLOW are 37% and 24% down year-to-date (YTD), with an overwhelming majority of holders of the former token in a loss at the current price per IntoTheBlock data.

The development team behind Algorand previously dismissed claims from the SEC on its native token in April when the securities regulator filed a lawsuit against Bittrex in April. The ALGO token was last week named in the same light as an unregistered security offering by the SEC lawsuit, which referenced an initial token sale for ALGO conducted in 2019 by the community-steered Algorand Foundation. The not-for-profit Foundation, whose scope includes protocol governance and token dynamic, pushed back against the label in a tweet at the time.

“We want to be clear: we believe that Algos are not securities under US law. We welcome clear regulatory guidelines for the advancement and growth of the entire industry.”

In light of the SEC claims, the development teams behind some of the affected tokens have issued statements clarifying that their offerings are not securities.

Cardano, Polygon and Solana challenge SEC token classification

The Solana Foundation was among the first to dispute the label on Thursday, as did enthusiasts of the Solana project, who opined that they did not expect development on the network to be impacted in the coming weeks.

“The Solana Foundation disagrees with the characterization of SOL as a security. We welcome the continued engagement of policymakers as constructive partners on regulation to achieve legal clarity on these issues for the thousands of entrepreneurs across the U.S. building in the digital assets space,” the Switzerland-based non-profit wrote on June 10.

Cardano developer Input Output Global (IOG) similarly refuted the claims while pointing out that the allegations from the US markets regulator bear “numerous factual inaccuracies” in a June 7 statement. In separate tweets, Cardano cofounder Charles Hoskinson and the Cardano Foundation also rejected the SEC label of the native token ADA as a security.

“The financing was done in Japan, no ADA was sold, only vouchers, marketing was in Japanese, priced in Yen and Bitcoin, no one from the United States participated. Ada launched in 2017 as an airdrop two years after the voucher sale. The facts might be inconvenient to the SEC, but are facts.” Hoskinson wrote.

Polygon Labs, too, noted that MATIC doesn’t qualify as a security, clarifying that the token was developed and deployed outside the US.

“Given our focus on network security, we made sure MATIC was available to a wide group of persons, but only with actions that did not target the US at any time.”

The plunging alt market boosted Bitcoin’s dominance which came close to the 50%-mark early Saturday.

Wu Blockchain highlighted that past bear cycles between 2018 to 2022 saw Bitcoin’s market share hover above the mark and even reach a peak of 69%.

US-based exchange operations hurt

Last week’s crackdown on the leading exchanges in the US crypto industry has hurt operations. The clampdown pushed Bitcoin and Ether reserves below 50% on US exchanges amid a regulatory crackdown. International exchanges currently custody more Bitcoin than US-based counterparts whose Bitcoin (BTC) reserves have dipped to their lowest level in over six years.

Falling crypto reserve balances indicate mass withdrawal of customer holdings from exchanges, usually to private wallets. In a separate post on Saturday, Zhao cautioned that some reports on the recently elevated outflows from centralized exchanges are skewed and, thus, not a reflection of the actual flows. He added that cycles of price volatility are also typically accompanied by large inflow and outflow movements.

SEC crypto crackdown updates

JP Morgan analysts earlier elaborated in a Thursday report on the SEC crypto crackdown, noting that crypto operations will continue moving outside the US until a solid legal framework is presented. Billionaire entrepreneur Mark Cuban also commented on the SEC action over the weekend, concluding that “it [is] near impossible to know, with or without an army of securities lawyers, what is or is not a security in the crypto universe.” Several other crypto executives and lawmakers have voiced their views on the lawsuits.

Remarking on the market state, Crypto.com CEO said he remains confident in the future of the crypto industry despite the recent turmoils. Crypto.com is one of the exchanges that have taken a hit from the prolonged bear market. The Singapore-based exchange said on Thursday that it will halt its service to institutional clients in the US after earlier notifying its institutional customers of the suspension of the service starting June 21.

“The fact that those tokens now trade publicly, with less disclosure and fewer investor safeguards than the SEC would like, is, from the SEC’s perspective, unfortunate. But it’s not exactly Solana’s fault, or rather it is Solana’s fault but in a perfectly legal way,” Bloomberg’s opinion columnist Matt Levine said last week.

Hong Kong provides a lifeline

In contrast with the picture in the US, Hong Kong has opened its arms to crypto trading platforms. In a June 10 tweet, Legislative Council member Johnny Ng formally extended to Coinbase and other global virtual asset trading operators an invitation to submit applications to set up regional shops in the Chinese special administrative zone. The city-state welcomed a new crypto regime on June 1 that allows virtual assets services providers to offering retail trading services in the market following approval from the regulators.

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