Crypto Update: Altcoins Soar Amid Regulatory Changes

Despite Bitcoin (BTCUSD) sliding on Monday, 2 December, putting the Trump Crypto rally on hold following weeks of increases, US-based cryptos soared.  Crypto-related stocks like Coinbase (COIN), Robinhood (HOOD) and MicroStrategy (MSTR) were also seen rising, 

BTC fell on the heels of the current Department of Justice’s decision to move $1.92 billion worth of BTC confiscated in 2014 by the US government from the Silk Road marketplace to Coinbase. Inflows into exchanges act as a signal of potential selling, raising speculation of a sell-off.  Hut 8 (HUT) and Riot Platforms (RIOT) faced a similar fate due to the imminent BTC pullback shy of the 100K mark. Marathon Digital (MARA) was also weighed down after announcing the increase of convertible senior notes to $850 million.

With the Fear & Greed index deep in extreme territory, this excess optimism might suggest further corrections in the short term until conditions for bulls become more favourable. Nonetheless, some believe that BTC’s supply on exchanges suggests a supply squeeze, with crypto-analysts arguing that institutional-driven capital inflows point to an approaching altseason. 

An altseason typically begins with Layer-1 and Layer-2 solutions gaining substantially while BTC dominance declines. Fallen altcoins, like IOTA (IOTUSD), also surged on risk sentiment as the altcoin index increased, but it was also supported by its recent software upgrade, Rebased, opening up an opportunity to earn staking rewards. Chainlink (LINKUSD), on the other hand, soared after announcing the expansion of its tokenised securities and settlement system across the Atlantic, in Europe.

US-Based Cryptos Soar

According to insider reports, the upcoming Donald Trump administration is preparing a proposal that eliminates capital tax gains on cryptocurrencies issued by US-registered companies like Bitcoin, Cardano (ADAUSD), Algorand, XRP, Constellation, Stellar (XLMUSD) and Hedera Hashgraph. (Source: Binance)

Following Gary Gensler’s resignation as the SEC Chair, the President-elect is expected to nominate a new Chair in the next day, according to FOX Business journalist Eleanor Terrett. According to Bloomberg, Paul Atkins, a veteran regulator whose firm consults banks, cryptocurrency companies and trading firms, is the top name discussed in private circles to lead the SEC. If nominated, Atkins will be tasked to regulate the $3 trillion crypto market, which has been vocal about how the lack of regulation poses a “fundamental underlying issue.”

SEC, under Gensler, sued Ripple Labs, the XRP developer company, in 2020, accusing the US-based company of selling unregistered tokens. However, Trump’s win and pro-crypto stance have led Gensler to step down. Recent rumours that XRP may launch its official stablecoin RLUSD and Wall Street’s move for XRP ETF are pushing correlated altcoin XLM higher. The altcoin has been soaring since the Federal Reserve announced they are investigating its blockchain to power the FedNow payment system. XLM has soared around 460% in the past 30 days, also supported by the return of some retail investors into the market.

Could Certain Crypto-Related Stocks Benefit?

Despite crypto-reported stocks performing mixed on Monday, some analysts argue that crypto trading services companies like Coinbase and Robinhood stand to profit from an expected rise in trading volumes. Analyst estimates suggest an EPS growth of 920% year-on-year for Coinbase and 430% for Robinhood. Others argue that MicroStrategy is the highest-valued crypto-related stock, outperforming its Bitcoin holdings by a merit of two. 

MicroStrategy's 500% increase year-to-date is primarily driven by the company’s aggressive BTC strategy. MSTR announced only yesterday that the company added another 15400 Bitcoins to its balance sheet to tally up its total to 402100 Bitcoins, now the second-largest holder of BTC behind IBIT. Michael Saylor, MSTR CEO, urged Microsoft (MSFT) to invest in BTC instead of buying back shares or paying out dividends in a move to reduce risk and improve company enterprise value after the company pushed back against such a proposal by the board. In his pitch to Microsoft, Saylor said Microsoft could generate as much as $5 trillion in market cap during a favourable political and market time. (Source: Yahoo Finance)

Conclusion

While Bitcoin faces a short-term correction shy of the $100K mark amid government sell-off speculation, altcoins like XLM and others are seizing the spotlight, buoyed by potential regulatory shifts under the incoming Trump administration and institutional interest.

The expectation of an altseason signalled by the rise of Layer-1 and Layer-2 solutions, points to a broader diversification within the crypto space, with crypto-related stocks like Coinbase, Robinhood and MicroStrategy poised to capitalise on a potential trend continuation.

As the altseason may be returning, the interplay between regulation and investor sentiment will likely continue to provide signals for investors and traders alike who are keen to participate in cryptos or crypto-related stocks.