The United States Securities and Exchange Commission (SEC) has started ramping up its crackdown on the crypto industry and recent enforcement actions had a negative impact on crypto prices last week and at the start of this week.
The SEC is focusing on stablecoin issuers. The most recent SEC stablecoin crackdown was on Feb. 13 through the issuance of a Wells Notice to Paxos Trust Company, the issuer of Binance USD (BUSD). While Paxos denies that BUSD is a security, which would place it outside the SEC’s jurisdiction, some lawyers say the answer is not so simple, which creates fear that other top stablecoin issuers like Circle’s USD Coin (USDC) could be next.
The SEC is also putting crosshairs on centralized exchanges (CEX) by questioning how they can use customer funds as qualified custodians. On Feb. 15, a five-member SEC panel will vote on whether to make it more difficult for crypto firms to hold digital assets.
Centralized staking platforms have also come under the SEC’s microscope and because staking programs provide investors with yield, the SEC believes these offerings are securities. On Feb. 9 the SEC began its assault on these programs by reaching a $30 million settlement over Kraken’s earn program.
Interestingly, traders have not adopted a fully risk-off position to the recent SEC activity, and certain decentralized solutions like GMX (GMX), Lido (LDO) and Maker (MKR) are soaring.
Let’s take a closer look at what’s with decentralized service providers.
Maker’s DAI stablecoin benefits from Paxos outflows
After the Wells Notice was sent to Paxos by the SEC, BUSD redemptions surged to $342 million in 24-hours. Redemptions from BUSD to Paxos, burn the outstanding debt token. So while Binance said they continue to support BUSD, its market cap will decrease over time with Paxos barred from minting new tokens.
Stablecoin market caps. Source: Nansen
While the drawdown has slowed, the BUSD market cap has dropped from $16.2 billion before the Feb. 13 SEC announcement to $15.4 billion on Feb. 14. The $15.4 billion market cap marks a monthly low for the third largest stablecoin.
BUSD market cap. Source: CoinGecko
On the heels of the SEC’s enforcement action, the issuer of the decentralized DAI stablecoin, Maker has seen an increase in usage and fees. Over a 7-day period, Maker fees have increased 8.37% and skyrocketed on Feb. 13 to $667,000 in 24-hours.
Maker fees and token holders. Source: Token Terminal
Maker is the top-10 performing token on Coingecko when sorted by percentage returns gaining over 8.8% in 7-days. With the uncertainty surrounding other large stablecoins like USDC after the SEC’s enforcement announcement, Maker’s fees could continue to increase.
GMX hits a new all-time high on as CEX uncertainty grows
GMX, the native token of the GMX decentralized derivatives exchange, has previously benefited when a major centralized exchange saw high outflows. GMX tends to see a boost in fees and its token price. As Binance net outflows reached $788 million in the 24-hours after the Feb. 13 SEC announcement, GMX price rose to a new all-time high at (insert GMX price). On Feb. 15, Binance saw another $535 million in net outflows.
Binance daily net flow. Source: Dune
On Feb. 10, GMX hit its all-time high of fees received, reaching $5.7 million. And with the daily active users increasing 16.2% to 2,150, the outflow from Binance may lead to sustained growth for the budding exchange.
Investors seem to be betting on GMX’s growth, making it the ninth top token on Feb. 14 by returns in 7-days by gaining 12.9%.
GMX key metrics. Source: Token Terminal
Lido stands to gain market share in the coming months
After the SEC’s $30 million settlement with Kraken, BTC and altcoin prices dropped, while LDO price surged.
Within 24 hours of the Feb. 9 SEC announcement, LDO gained 13.2% and investors seem to believe that Lido can repeat this action as it is a top twelve performing token with 16% 7-day gains.
In addition to price growth, Lido’s usage as a decentralized staking platform has skyrocketed, seeing $35.8 million in 30-day fees.
Lido key metrics. Source: Token Terminal
While Lido has not witnessed an increase in average daily active users, the potential for future enforcement actions against Coinbase might translate to an increase in Lido’s market share among Ether stakers.
What is clear is that the string of recent SEC crackdowns on centralized staking, centralized exchanges and stablecoins are leading investors to position themselves in decentralized solutions like GMX (GMX), Lido (LDO) and Maker (MKR).
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