The crypto market had a good week overall with Bitcoin and Ethereum rising by low-single-digit percentages until early morning on Friday. But at about 9 a.m. ET, the entire industry began to go into a tailspin.
According to data provided by S&P Global Market Intelligence, as of noon ET Friday, Dogecoin (DOGE -1.79%) was up by 9.5% over the past week but after a rapid decline of 10% in the last two hours, it's now down slightly for the week as of 3 p.m. ET. VeChain (VET 0.84%) was up 13.8%, only to fall by 10.6% in the past 24 hours and is now up just 3.2% for the week. Uniswap (UNI -0.86%) was hit 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 was up in large part because meme coins have become popular again. Newer tokens dogwifhat (yes, that's the name) and Pepe have hit multibillion-dollar market caps with little utility other than trading and a meme.
Memes have always been part of the appeal of cryptocurrencies, but the past few months have seen launches on multiple blockchains that have brought more funds into the ecosystem and benefited many established users who were airdropped tokens.
The downside is that a market slide will hit meme coins harder than utility tokens.
Utility for the win
VeChain has gained traction on the hope it can become a low-cost, high-throughput blockchain as Solana struggles to perform under high transaction loads. The promise of Solana was that it could scale faster and more cost-effectively than older blockchains, but achieving those things has proved more difficult than expected.
Investors have been looking for the next hot blockchain for years, and VeChain could be it if users increase their adoption of it.
Uniswap's terrible week
This week, the Securities and Exchange Commission (SEC) sent Uniswap Labs a Wells notice -- a notification that the regulator is planning a legal action against the group. This wasn't the first Wells notice in crypto, and companies have been fighting the SEC for years, but such actions are not good news for crypto holders.
It's not clear what Uniswap Labs will be charged with, nor what the outcome of the case will be, but if previous SEC actions are any indication, it's likely that a years-long legal battle is ahead for the decentralized finance platform developer. And that's not a distraction it needs.
Tailwinds may be fading
Over the past few months, crypto has had major tailwinds as Bitcoin ETFs were approved by the SEC and speculation about other crypto ETFs and lower interest rates ran rampant. But the past week has seen some of that optimism recede.
Higher-than-expected inflation is pushing market interest rates higher, and growth and tech stocks are moving lower as a result. The movements of the crypto market have correlated heavily with those of growth and tech stocks, which in part explains why some of the upward momentum for crypto is fading.
I think the SEC's case against Uniswap is more important than many observers may believe because it indicates the regulator will continue to go after companies in the space, despite its previous losses in crypto-related cases.
What the crypto and blockchain industry needs is regulatory clarity, and it's getting that in many countries around the world. But in the U.S., Congress and the SEC have been unable to come to decisions about what to do with crypto long term.
The good news is that big banks are moving forward with crypto development and blockchain tools, and that will force some clarity one way or another. But the crypto market will be volatile in the meantime.
