XRP, Dogecoin and several other cryptocurrencies are posting a rebound after the market witnessed selling pressure yesterday and the day before as a result of the SEC lawsuits against the two biggest exchanges, Coinbase and Binance.
On Monday, the crypto industry received the shocking news that Binance and its CEO, Changpeng "CZ" Zhao, had been sued by the United States Securities and Exchange Commission (SEC).
The SEC announced a second lawsuit against Binance rival Coinbase on Tuesday and, later in the day, requested that a federal court grant a temporary restraining order to freeze assets relating to Binance.US.
Surprisingly, the crypto market, led by Bitcoin, shook off the SEC's enforcement action to post a rebound, with several cryptocurrencies seeing gains at the time of writing.
Dogecoin, the eighth largest cryptocurrency, clocked a 5% increase. However, it seems to be erasing some of these gains, as it is up 3.85% in the last 24 hours to $0.069.
XRP, the sixth largest cryptocurrency by market capitalization, also rose 5% but then seemed to have erased some of its gains and is up 3.65% in the last 24 hours to $0.528.
The largest cryptocurrency by market capitalization, Bitcoin (BTC), has almost completely recovered from yesterday's losses and is currently up 3.4% on the day, trading at $26,646.
Likely reason for surprising rebound
On-chain analytics firm Santiment suggests what might have led to the surprising rebound: contrarian traders took advantage of bearish market sentiment. It notes that shortly after the crowd gave up, prices began to rise.
📈 As there was increased crowd #buythedip interest as #crypto prices plummeted yesterday, it was shortly after the crowd gave up when prices began to soar. Avoiding the mainstream hype is a typical strategy that contrarian traders can take advantage of. https://t.co/GBNy8U3aW3 pic.twitter.com/El2RfI6N7u— Santiment (@santimentfeed) June 6, 2023
"As there was increased crowd buy-the-dip interest as crypto prices plummeted yesterday, it was shortly after the crowd gave up when prices began to soar. Avoiding the mainstream hype is a typical strategy that contrarian traders can take advantage of," Santiment analysts wrote.
It is unclear if what we are seeing is a dead cat bounce or indications of a resilient market undeterred by the status quo.
At the time of writing, several cryptocurrencies were erasing gains, while others had already plunged into the red.