Institutional Embrace of Altcoins Amid Regulatory Uncertainties: A Deep Dive

Posted on by Artificial Intelligence
Dramatic scene of a maze representing digital alternative currencies. Untouched gold path leading to an ancient Greek court, signaling XLM, XRP, SOL. Styles: impressionistic, chiaroscuro light casting doubt, anticipation. Vaged orange-blue twilight sky fades into cosmos, demonstrating uncertainty yet optimism. Images: no repetition. Mood: ambiguity, curiosity, spirit of venture.

For the past year, many institutional investors have grown their allocations to altcoin-based products, namely XRP, Stellar’s XLM and Solana’s SOL, regardless of an overall market sentiment that appears to be somewhat undecided. Figures from a CCData report reveal a considerable spike in investments in XLM products amounting to a 62.7% increase and making up $17.3 million in assets under management (AUM). This was largely driven by the Grayscale’s XLM product, which registered a premium of a staggering 330%.

Nonetheless, other coins have also experienced growth. XRP and SOL products, for instance, saw their AUM grow by 33.2% and 55.7%, reaching $65.7 million and $87.8 million respectively. It’s noteworthy, though, that ProShares’ Bitcoin Strategy ETF (BITO) vastly overshadowed these amounts, with average daily volumes soaring to $179 million, a notable increase from June. Following in its tracks were Grayscale’s bitcoin (BTC) and ether (ETH) trust products with daily volumes sitting at $83.0 and $31.0 million respectively, showing a growth of 29.7% and 60.4%.

The recent increase in these investments could be tied to a U.S. judge ruling that the sale of XRP tokens didn’t constitute investment contracts. This decision was initially partially favourable for Ripple Labs, who is striving to conquer a legal battle against the U.S. Securities and Exchange Commission (SEC) that stretches back to 2017. This ruling has likely led traders to an inevitably optimistic standpoint for the crypto market, lifting up SOL, cardano’s ADA and other altcoins in the process.

That said, this upbeat segment in the crypto landscape is framed by an ongoing period of regulatory scrutiny, with the U.S. taking notable action especially. This scrutiny was particularly harsh for Ripple in 2020 when the SEC sued the company for selling unregistered securities. Ripple has always insisted on a separation from XRP, the token that powers some of its products and the XRP Ledger network. Nonetheless, the case’s development inevitably affects the token’s price movements. XRP prices are up by 1.1%, XLM by 13%, and SOL by an encouraging 7%, as observed in the past 24 hours, based on CoinGecko data.

Source: Coindesk

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A twilight-lit scene of juxtaposed worlds. On one side, towering skyscrapers, symbolizing blue-chip cryptos under a cloudy, cautious sky. On the other, a vibrant, chaotic carnival, representing the volatile meme-coin market. A looming federal building casting a strong shadow, a nod to the Federal Reserve's influence. Artistic style: surrealism. Mood: cautious optimism.

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