Traders Flinch as SEC Goes After Do Kwon, With AI Cryptos Hit Hard

The AI token category stood out as the weakest sector on the day while layer-2 tokens held their ground amid minor market volatility

article-image

Source: Shutterstock / WindAwake, modified by Blockworks

share

Artificial intelligence-related tokens took a beating Thursday as markets stooped amid revelations the SEC had charged Terraform Labs’ CEO and fugitive, Do Kwon, with fraud.

Top AI tokens, including SingularityNet’s (AGIX), Fetch.ai’s (FET) and Artificial Liquid Intelligence’s (ALI) sank 14%, 12% and 11.5% respectively, representing some of the worst impacted assets above a $200 million market cap over the past 24 hours.

The market value for the entire AI sector dipped 11.2% from yesterday’s reading of $2.14 billion to $1.9 billion, marking the industry’s worst-performing sector, data provided by CoinGecko show. 

Today’s decline can be viewed as a continuation of the unwinding occurring across AI-related digital assets following their incredible run up earlier this year. FET’s year-to-date performance for example — which began in earnest immediately following Jan. 1 — is a gain of 360%.

AGIX is soaring high, posting an eye-watering 800% gain this year, while ALI and Ocean Protocol’s (OCEAN) are up 610% and 174% respectively. Related AI projects have been riding shotgun alongside a renewed interest in the underlying tech sector’s success from the likes of OpenAI’s ChatGPT and DALL·E 2.

It would appear, for now, traders are yet to concede on the bullish momentum driving associated AI tokens and projects higher. 

Stablecoin in/out flows remained fairly mixed with Tether’s USDT exhibiting a greater flow out of exchanges than in, signaling traders are opting to remain long by keeping assets off centralized platforms, data from IntoTheBlock show.

By comparison, major cryptos ether and bitcoin are down around 2.2% and 3.5% over a 24-hour period but remain squarely in the green in YTD terms, up around 38% and 42%. Other top 20 cryptos, while down around 1% and 6% on the day, continue to hold their head above water on a YTD basis.

SEC moves against Terraform’s Do Kwon

The latest bout of volatility comes as Terraform’s Do Kwon was slapped with two charges late Thursday over allegations he violated US securities laws last year and deceived investors on a number of “inter-connected suite of crypto asset securities.”

Traders began to sell into the news, forcing bellwether crypto bitcoin -3.3% lower on the day to roughly $23,400. The asset was last seen trading at around $23,800 good for around a 1.8% bounce, TradingView data show.

Questions continue to hang overhead like a sword of Damocles on how exactly the Securities and Exchange Commission intends to regulate crypto, as well as its intentions to forge ahead with its own definition of what constitutes crypto asset securities.

Blockworks was told Wednesday the crypto ecosystem could see regulatory volatility throughout 2023.

While AI tokens took a hit, those associated with layer-2 projects and protocols remained steady, posting a roughly 6% jump in market value collectively from $14.6 billion to $15.6 billion, CoinGecko data show.

In the face of depreciating values and market uncertainty, the sector represented the strongest-performing category on the day. Assets belonging to proof-of-stake sidechain Polygon (MATIC), which is also launching a layer-2 zkEVM, and Loopring (LRC) which were up between 6% and 2% respectively over the last 24 hours and showed little sign of capitulation from intra-day traders.

Read more: Will The SEC Staking Hammer Hit Validators and Protocols Next?


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Unlocked by Template.png

Research

With the spot ETH ETF approval, the institutions are coming. stETH - given its dominance in marketshare, existing liquid market structures, and highly desirable properties - is poised for institutions.

article-image

Trump insiders say he will dismantle the anti-crypto army within an hour of taking office, but the campaign has been quiet about how it plans to do so

article-image

Plus, Solana set a record for weekly unique active addresses on the network last week

article-image

Launching cryptocurrencies the old fashioned way may soon make a return

article-image

Kraken and CertiK brought their beef to social media after Kraken said researchers exploited $3 million through a bug

article-image

NVIDIA’s historic run is only deepening the divide between mega-cap tech stocks and the rest of the market.