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Why Uniswap led a crypto crash this week
THE crypto market had a good week overall with Bitcoin And Ethereum increasing by single-digit percentages through early morning Friday. But around 9 a.m. EST, the entire industry began to collapse.
According to data provided by S&P Global Market Intelligencestarting at noon ET Friday, Dogecoin (CRYPTO:DOGE) is up 9.5% over the past week, but after a rapid 10% decline over the past two hours, it is now down slightly for the week as of 3 p.m. ET. VeChain (CRYPTO:VET) rose 13.8%, then fell 10.6% over the past 24 hours and is now only up 3.2% for the week. Uniswap (CRYPTO:UNI) was hit the hardest and is now down 31% for the week.
The meme of a week
Dogecoin was the favorite meme cryptocurrency of the last cycle, and it rose largely because meme coins became popular again. Newer tokens dogwifhat (yes, that’s the name) and Pepe have reached multi-billion dollar market caps with little use other than trading and a meme.
Memes have always been part of the appeal of cryptocurrencies, but recent months have seen launches on multiple blockchains that have brought more funds into the ecosystem and benefited many established users who have been parachuted in by tokens.
The downside is that a market decline will hit meme coins harder than utility tokens.
The utility for victory
VeChain has been gaining ground in hopes of becoming a low-cost, high-throughput blockchain. Solana has difficulty operating under high transaction loads. Solana’s promise was that it could scale faster and more cost-effectively than older blockchains, but achieving this has proven more difficult than expected.
Investors have been looking for the next hot blockchain for years, and VeChain could be it if users increase adoption.
Uniswap’s terrible week
This week, the Securities and Exchange Commission (SEC) sent Uniswap Labs a Wells Notice – a notice indicating that the regulator is considering taking legal action against the group. This was not Wells’ first notice in the crypto space, and companies have been fighting the SEC for years, but such actions are not good news for crypto holders.
It’s unclear exactly what Uniswap Labs will be charged with, or what the outcome of the case will be, but if the SEC’s previous actions are any indication, it’s likely that a multi-year legal battle lies ahead over the developer of decentralized financial platform. And it’s not a distraction he needs.
Tailwinds could ease
Over the past few months, crypto has seen major tailwinds as Bitcoin ETFs were approved by the SEC and speculation about other crypto ETFs and falling interest rates became widespread. But last week, that optimism receded.
The story continues
Higher-than-expected inflation pushes market interest rates higher, and growth and technology stocks fall accordingly. Crypto market movements are highly correlated with those of growth and tech stocks, which is part of the reason why some of crypto’s bullish momentum is fading.
I think the SEC’s case against Uniswap is more important than many observers realize, because it indicates that the regulator will continue to go after companies in the sector, despite its previous losses in crypto-related cases.
What the crypto and blockchain industry needs is regulatory clarity, and it is getting it in many countries around the world. But in the United States, Congress and the SEC have not been able to make decisions on what to do with crypto in the long term.
The good news is that major banks are making progress in developing crypto and blockchain tools, which will force some clarity one way or another. But the cryptocurrency market will be volatile in the meantime.
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Travis Hoium has positions in Ethereum and Solana. The Motley Fool has positions and recommends Bitcoin, Ethereum, Solana and Uniswap Protocol Token. The Mad Motley has a disclosure policy.
Why Uniswap led a crypto crash this week was originally published by The Motley Fool