On Wednesday, many altcoin investors got that late 2022 feeling again, and the sensation was hardly pleasant. Mirroring the typical trajectory of that period, a clutch of top altcoins saw notable declines on the day.
For example, as of late afternoon, meme coin Dogecoin (DOGE -7.52%) was down by nearly 4% across the preceding 24 hours, Polkadot (DOT -5.72%) had fallen more than 6%, and Cronos (CRO -9.81%) was tumbling by 9%. A fizzling rally in top cryptos was the drag pulling down most coins and tokens.
There’s nothing like a major government enforcement action to put the damper on a rally. Sure enough, the Department of Justice’s announced that it had arrested Anatoly Legkodymov, the founder of crypto exchange Bitzlato, for alleged unlicensed money transmitting. This followed an announcement that the DOJ had major crypto regulatory enforcement news to impart, which spooked the market.
In a press conference on the Legkodymov arrest, U.S. Attorney Breon Peace said that “Institutions that trade in cryptocurrency are not above the law and their owners are not beyond our reach.” In other words, crypto developers and exchanges, watch your back because we’re watching you.
No one is accusing Dogecoin, Polkadot, or Cronos of similar malfeasance involving vast piles of funds. But the DOJ’s splashy arrest and subsequent press conference represent another ding in the reputation of cryptocurrencies. They keep getting associated with criminals, which does little to boost investor morale on their viability.
It’s too soon to tell whether this has entirely killed the recent rally in cryptocurrencies. My guess is that they’ll bounce back rather soon, as many investors had been cheered by recent macroeconomic developments — and the consequent possibility that the Federal Reserve will halt its interest rate rises before long. That would benefit investments seen as relatively speculative, like digital coins and tokens.