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Will US Regulations Stifle Alts?

Are More Exchanges Going to Limit Altcoins to Comply with Regulation?

2019-06-17 13:48:00 | Jonathan Ganor

Bitcoin seems to be reaching higher highs, despite many nations clamping down on cryptocurrencies. Just yesterday Bitcoin broke $9300 even with the growing regulation in the industry. Regulation might not necessarily be a horrible thing for Bitcoin's price, although it could affect other digital currencies.

In some countries restrictions and regulations are downright bizarre. It has been reported that there is a draft law in India which proposes a 10 year jail sentence for whoever deals in cryptocurrencies in one way or another. Regulation in most countries simply deals with taxation and token sales/ICOs to some degree. In the US however, the SEC (Securities and Exchange Commission) is known for its strict treatment of cryptocurrencies.

 In 2018 the SEC deemed ICO's (initial coin offerings) as illegal securities. While the SEC have never been very "crypto friendly" they are making it increasingly difficult for newcomers the crypto space. Many new cryptocurrencies are deemed as securities, and therefor would be inaccessible for U.S. traders.

It is important to note that the SEC hinted in the past that that Bitcoin & Ethereum are not securities. This might extend to the top 5 cryptocurrencies which includes BTC, ETH, XRP, LTC, & BCH but it is unclear at this point.

While it is very difficult to accurately gauge the size of the United States cryptocurrency market, it is likely a major player.


Exchanges Respond!

The worlds leading exchange by adjusted volume, Binance has taken action. They have announced that it will be restricting U.S. traders in the future from their main platform, and U.S. traders will have to use a U.S. dedicated version of their exchange. It is likely that the U.S. dedicated platform will offer a much shorter list of cryptocurrencies to adhere to SEC regulations.

Many other exchanges might follow Binance's lead and launch U.S. only versions of their platform.


2017 - 2019 "Bubble" Comparison

One of the defining effects of the 2017 "Bitcoin bubble" was the altcoin rally and the ICO explosion. Since 2017, many countries have introduced regulations especially China & the USA. It seems that ICO/ITO/IEOs are making a comeback and are already visible as on exchanges as IEOs. It is very doubtful that they will manage to raise the same amount of funds as in 2017-18 without the American and Chinese market participating.

The altcoin rally may also play out very differently. Back in 2017, the cryptocurrency industry was a bit like the wild west. People were openly running pump & dump groups, and everyone was looking for the "next Bitcoin". Altcoins followed Bitcoin's lead for the most part but was even more volatile. Some pumped massively only to crash to 0. This caused colossal losses to some.

While this is a very big *if*, but if U.S. traders will only be permitted to trade on the top 5, no altcoin rally will likely follow outside the 5.

While this may have little to no effect on Bitcoin and most of the other top 5 and might even help their rise, Ethereum might stumble. Some have even speculated that the existence of altcoins is suppressing Bitcoin's price.

One of the motivators of Ethereum's all-time high of 2017, was the ICO craze. ICOs were usually built on the Ethereum blockchain as ERC20 tokens and accepted ETH as a form of payment to fundraise their token. It seems that the craze may never return. In addition to that, Ethereum has had several serious competitors arise such as EOS & TRON.


Bottom Line

It seems that the 2017 rally and the 2019 rally be very different, primarily due to regulatory changes and financial institutes entering the market. The is only one thing that is certain, cryptocurrencies are here to stay.

 

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