Pepe, Kava, ApeCoin, CFX, Optimism prices popped: dead cat bounce?

Cryptocurrency prices staged a strong recovery even as the Securities and Exchange Commission (SEC) continued its battle against digital coins. On Monday, the SEC launched a lawsuit against Binance and CZ, as we wrote here. And on Tuesday, it sued Coinbase, the biggest crypto company in the United States.

Altcoin prices surge

Bitcoin and most altcoin prices crashed after the SEC launched its lawsuit against Binance. They then dropped slightly after the Coinbase lawsuit. To a large extent, it was a matter of when and not if the SEC would sue Coinbase. 

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In a statement, Coinbase’s CEO said that the company will defend itself in court and explained why he is optimistic. For example, he noted that the SEC had reviewed the company when it filed its papers to go public in 2021. He added that:

“Instead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America. So if we need to avail ourselves of the courts to get clarity, so be it.”

Pepe, the new meme coin, was one of the best-performing token on Tuesday. According to CoinMarketCap, the token jumped by over 21% in the past 24 hours. Lido DAO, the biggest liquid staking company in the world, followed it.

As I wrote here, Lido DAO is set to benefit from the crackdown of staking because of its decentralized nature. Unlike Coinbase, this is a very difficult company to sue since it is governed by LDO token holders, who are mostly anonymous.

Kava price jumped by over 20%. Other top-performing tokens were Optimism, Conflux, and Stacks. Optimism’s OP price jumped after the developers activated the Bedrock upgrade.

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Is this a dead cat bounce?

There are four main reasons why Bitcoin and these altcoins are surging. First, it is because of a situation known as buy the rumour, sell the news. The inverse of this situation is happening now. Most crypto followers and investors were aware that these lawsuits were coming. Therefore, they are buying the dip since the news was expected.

Second, the altcoins are rising because of history. In the past, Bitcoin and other altcoins have survived major events. For example, cryptocurrencies surged after the collapse of Mt Gox in 2014. Most recently, they rallied after FTX and Terra collapsed. 

Further, there are lessons from Ripple. For one, XRP price jumped after the SEC launched its lawsuit in 2020. Since then, its price has moved in the same direction as Bitcoin and other large coins.

Finally, this could be a dead cat bounce. The idea is that a dead cat will often bounce when it is dropped from a high level. In trading, this means that an asset will tend to bounce back briefly after experiencing a major dip. As such, this means that traders should be cautious when implementing buy orders.,