SEC enforcement action creates a silver lining for GMX, Lido (LDO) and Maker (MKR) price

The US Securities and Exchange Commission (SEC) has begun ramping up its crackdown on the crypto industry, and recent enforcement action has had a negative impact on crypto prices last week and earlier this week.

The SEC focuses on stablecoin issuers. The most recent SEC crackdown on stablecoins occurred on February 13 as a result of the release of a Wells notice to Paxos Trust Company, the issuer of Binance USD (BUSD). While Paxos denies that BUSD is a security, which puts it outside the SEC’s jurisdiction, some lawyers say the answer is not so simple, raising fears that other leading stablecoin issuers such as Circle’s USD Coin (USDC) could be next. .

The SEC is also questioning centralized exchanges (CEXs), wondering how they can use customer funds as qualified custodians. On February 15, a five-member SEC panel will vote on whether to make it harder for crypto companies to hold digital assets.

Centralized placement platforms have also come under the SEC’s microscope, and because staking programs generate income for investors, the SEC considers these offerings to be securities. On February 9, the Securities and Exchange Commission launched an offensive against these programs, reaching a $30 million settlement for Kraken’s earnings program.

Interestingly, traders have not completely given up risk due to the recent SEC activity, and some decentralized solutions such as GMX (GMX), Lido (LDO) and Maker (MKR) are skyrocketing.

Let’s take a closer look at what’s happening with decentralized service providers.

Maker DAI stablecoin benefits from Paxos outflow

After the Securities and Exchange Commission (SEC) sent a Wells notice to Paxos, BUSD redemption rose to $342 million in 24 hours. BUSD redemption on Paxos, burning the outstanding debt token. So while Binance has stated that it continues to support BUSD, its market cap will decrease over time as Paxos will be banned from issuing new tokens.

Market capitalization of a stablecoin. Source: Nansen

While the drawdown has slowed, BUSD’s market capitalization has fallen from $16.2 billion before the SEC announcement on Feb. 13 to $15.4 billion on Feb. 14. A market capitalization of $15.4 billion is a monthly low for the third largest stablecoin.

Market capitalization of BUSD. Source: CoinGecko

Following enforcement actions by the SEC, the issuer of the decentralized stablecoin DAI, Maker has experienced an increase in usage and fees. In 7 days, the Maker fee increased by 8.37% and rose sharply on February 13 to $667,000 in 24 hours.

Maker commission and token holders. Source: Token terminal

Maker is one of the top 10 tokens on Coingecko when sorted by interest income, gaining over 8.8% in 7 days. Due to the uncertainty associated with other major stablecoins such as USDC, Maker fees may continue to rise following the SEC announcement of enforcement.

GMX hits new all-time high as CEX uncertainty rises

GMX, the native token of decentralized derivatives exchange GMX, has previously benefited when a large centralized exchange experienced high churn. GMX tends to increase fees and token value. As Binance’s net outflow reached $788 million in the 24 hours after the Feb. 13 SEC announcement, GMX price surged to a new all-time high (insert GMX price). On February 15, Binance recorded another $535 million in net outflows.

Binance Daily Net Stream. Source: Dune

On February 10, GMX reached an all-time high in grosses received, reaching $5.7 million. And with the number of daily active users up 16.2% to 2,150, a churn from Binance could lead to a steady rise for the fledgling exchange.

Investors seem to be betting on GMX going up, making it the ninth token on Feb. 14 in 7-day returns, up 12.9%.

Key indicators of GMX. Source: Token terminal

Lido is set to increase market share in the coming months

Following the $30 million SEC settlement with Kraken, BTC and altcoin prices fell while LDO prices rose.

Within 24 hours of the Feb. 9 SEC announcement, LDO gained 13.2%, and investors seem to believe Lido could repeat the move as it is a top 12 performing token with a 7-day gain of 16%.

In addition to price increases, Lido’s use as a decentralized staking platform has skyrocketed, with 30-day fees totaling $35.8 million.

Key indicators of lido. Source: Token terminal

While Lido has not seen an increase in average daily active users, the possibility of future enforcement actions against Coinbase could lead to an increase in Lido’s market share among Ethereum market participants.

What is clear is that a string of recent SEC crackdowns on centralized staking, centralized exchanges and stablecoins is encouraging investors to position themselves in decentralized solutions such as GMX (GMX), Lido (LDO) and Maker (MKR).

The views, thoughts and opinions expressed here are those of the authors only and do not necessarily reflect or represent the views and opinions of Cryptooshala.

This article does not contain investment advice or recommendations. Every investment and trading step involves risk, and readers should do their own research when making a decision.

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