Smaller, lesser-known digital tokens such as Solana and Avalanche are outperforming Bitcoin for a second day after a federal court decision in a case involving Ripple Labs Inc. fuels a “fear of missing out” impulse among cryptocurrency proponents.
An index comprising the bottom half of the top 100 tokens by market value climbed around 4.8% on Friday. Bitcoin, which accounts for about half the $1.25 trillion crypto market’s value, slipped less than 2% to around $30,900, thought it still trades near the highest price level of the year.
Altcoins were weighed down in the second quarter by the US Securities and Exchange Commission’s growing list of coins viewed as unregistered securities, a designation that can make those assets harder to trade. Bitcoin didn’t face a similar overhang, gaining 7% during the same period, because American officials view it as a commodity.
“A lot of buyers recognize that these altcoins have missed out on the rally, and that there’s some immediate upside to be had,” said Michael Safai, partner at quantitative trading firm Dexterity Capital. “There’s also a bit of FOMO in play; if the regulatory outlook brightens further, the conditions for a prolonged rally start to emerge.”
The SEC lawsuit against Ripple Labs has kept crypto on edge since 2020 by raising the prospect that digital tokens are securities that fall under the agency’s strict regulatory purview.
The judge in the proceedings ruled on Thursday that the XRP token linked to Ripple was a security when sold directly to institutions but not when offered to the public on exchanges. The industry rejoiced in the implication of potential limits to the SEC’s power to extend a crackdown on a sector it argues is replete with risky practices.
“With the determination that XRP is not a security, the market now assumes that most other altcoins won’t be classified as securities either,” said Jaime Baeza, CEO of crypto hedge fund AnB Investments.
XRP fell about 10% to around 73 cents on Friday. The token had surged 73% after the court ruling.
Trading volume for XRP grew by around 300% in the past 24 hours as of 1:10 p.m. New York Time, ranking third by volume, according to data from CoinMarketCap. Other major altcoins such as Solana and Cardano’s ADA saw a 135% and 295% increase in trading volume during the same period respectively.