The recent decision by the Securities and Exchange Commission to not classify bitcoin and ethereum as securities was expected to spark higher crypto prices, and it did — for a short while. Despite the price spike of major coins, the market largely absorbed the shock of the announcement and reverted to the same levels the cryptocurrencies have been hovering around for several weeks now.
The short bounce raised important questions about the market, namely why the bull market that many expected failed to materialize. After prices reverted to the recent range, it became clear that the announcement was not as uplifting as expected, and it did little to solve many of the problems that remain endemic to the crypto market.
For one, while bitcoin and etherem were finally categorized, the rest of the cryptocurrency market is stuck in a grey area in regard to regulation. Moreover, the decision, while positive for some institutional investors, did little to sway the opinion of the institutional sector. All in all, these factors combined to put pressure on BTC and ETH prices and there is little certainty that they will be removed soon, further dampening optimism about a potential bull market resumption.
A Short, But Unsustainable Spike
ETH and BTC prices did indeed surge following the SEC’s announcement, with ETH rising by as much as 11% in value, and BTC jumping 5% higher. However, ETH soon fell back down, and though it has recovered since then, it is far from the bull market many anticipated. Neither coin has been able to reclaim the highs they achieved toward the end of 2017. This failure to launch has puzzled many crypto bulls who foresaw a massive influx of cash once the SEC’s potentially crippling classification was taken off the table.
Classifying BTC, ETH, and other cryptocurrencies as securities means that they would be subject to significantly stricter regulations than they are now, when they’re technically considered commodities. Securities, as defined by the Howey Test, are subject to strict disclosure and filing laws which would drastically change the way cryptocurrency transactions and trading must operate. While the debate as to whether bitcoin, ethereum, and other coins meet the Howey Test’s bar remains controversial, the SEC’s decision was expected to unleash bitcoin’s price. By removing the regulatory hurdles securitization would imply, the market was supposed to explode.