Here’s Why Bitcoin, Ethereum, and Ripple Are Up Despite the SEC’s Crypto-Crackdown

The Securities and Exchange Commission, or SEC, is conducting a probe into the cryptocurrency industry. At first, this may sound like it would be a big negative catalyst for cryptocurrencies such as bitcoin (BTC-USD) and Ethereum (ETH-USD), but this doesn't seem to be the case. In fact, the five largest cryptocurrencies are all higher on Thursday. Here's why the SEC's involvement could actually be a good thing.

Today's cryptocurrency prices

The majority of cryptocurrencies are in the green today, including the biggest names such as bitcoin, Ethereum, and Ripple (XRP-USD). Here's a quick look at the five largest cryptocurrencies by market capitalization, and how much each has changed over the past 24 hours.

Data Source: www.investing.com. Prices and daily changes as of March 1, 2018 at 2 p.m. EST, and prices are rounded to the nearest cent where appropriate.

The SEC just launched a cryptocurrency probe

Late Wednesday, The Wall Street Journal reported that the Securities and Exchange Commission (SEC) is launching a probe into the cryptocurrency market. This shouldn't come as too much of a surprise, as the agency has warned the American public about investing in cryptocurrencies several times.

Image Source: Getty Images.

Details are light at this point, but the report indicates that the SEC is most interested in initial coin offerings, or ICOs. An ICO is a way for companies to raise capital by issuing newly created cryptocurrencies and is largely unregulated at this point, especially when compared with initial public offerings, or IPOs.

The report said the SEC has issued subpoenas to several companies and individuals involved with the cryptocurrency markets.

Why this could actually be a positive catalyst

To be clear, I'm not necessarily saying that the announcement of the SEC's probe into the cryptocurrency industry is the reason for today's positive price action, although it seems pretty clear that the market isn't afraid of it.

Long-term, the SEC's involvement in cryptocurrency regulation could be a major positive catalyst, not just for cryptocurrency prices, but for their mainstream acceptance as methods of payment, stores of value, and means to transfer money.

Specifically, increased regulation could help solve several of the biggest challenges cryptocurrencies face, such as the public's perception and the volatility of the market.

About 5% of the U.S. population has bought bitcoins or another cryptocurrency, and it's fair to say that many people who have not gotten involved simply don't trust digital money. And with stories about scam ICOs, big price swings, and cryptocurrency advertisements that scream "get-rich-quick scheme," who could blame them?

Tighter regulations on ICO markets and cryptocurrency companies could help the public feel more confident that they aren't falling victim to a scam. Uncertainty surrounding regulations is also abig cause of volatility in the crypto market. So, any clarity on where the SEC stands on cryptocurrencies could help. And as most long-term investors can tell you, uncertainty is generally a negative catalyst.