(Bloomberg) -- Cryptocurrency advocates appear to be talking in stride the US Securities and Exchange Commission’s widening crackdown on the digital asset sector.

Token prices were mostly higher on Tuesday after the agency accused Coinbase Global Inc. of running an illegal exchange. Many coins were on the verge of recovering all the losses posted Monday, when the regulator sued rival Binance Holdings Ltd., alleging a slew of violations. 

Outflows of customers’ funds from Binance and Coinbase initially spiked when the first suit was filed Monday before slowing over the past 24 hours, according to blockchain data from two analytics firms. Overall, Binance has been hit with about $1.3 billion of net outflows as of 11:30 a.m. New York tune on Tuesday. Nansen, which said Coinbase does not disclose its crypto wallets on the blockchains, estimated the US firm had outflow of about $1.28 billion during the same period. Activity appears to have slowed Tuesday. Julio Moreno, head of research at CryptoQuant, said that outflows were “muted” since the news broke on SEC’s lawsuit against Coinbase.

In the lawsuits against Binance and Coinbase, many tokens were listed as unregistered securities by the SEC, including Binance’s BNB tokens, Cardano’s ADA, Solana’s SOL, Polygon’s MATIC, Filecoin’s FIL, Algorand’s ALGO, and Dfinity’s ICP. The prices on all but Polygon’s token were positive on Tuesday.

“Some of the tokens listed as securities did underperform relatively, but I think this shows that US institutions already had decreased their relative exposure,” said Shiliang Tang, chief investment officer at crypto investment firm LedgerPrime. “There’s also just not much leverage in the system anymore in crypto, so we’re not seeing much liquidations.”

Bitcoin, which accounts for about half of the $1.1 trillion crypto market, rose about 4.8% to $26,873 on Tuesday. It has slumped 5.9% on Monday, falling to the lowest price level since April. The market bellwether is still up about 58% this year, after tumbling 64% in 2022. 

Underpinning Bitcoin’s partial comeback since the start of the year were expectations that the banking crisis that erupted in the US in March would force the Federal Reserve to hit pause on rate increases. That allowed Bitcoin bulls to raise the case that the token stands to gain from lower real interest rates, and that it offers shelter from turmoil in traditional finance.

According to Clara Medalie, director of research at crypto data firm Kaiko, Binance and its US platform Binance US accounted for 54% of the global crypto trading market share, while Coinbase accounted for about 6.5%. However, among US exchanges, Coinbase’s volume stood at 53% of the trading volume, making it the largest in America. 

As Bloomberg reported, after the Commodity Futures Trading Commission sued Binance and its CEO Changpeng Zhao in March, some trading shops such as Jane Street Group and Jump Crypto already scaled back their exposure on crypto. 

“Bigger trading shops have been more mindful in how they trade on Binance since the CFTC lawsuit dropped, so a lot of the potential risk has already been managed,”said Michael Safai, partner of quantitative trading firm Dexterity Capital.

“If exchanges are going to be impacted for liquidity, that process already started way back when the CFTC action dropped, possibly even before, so this is beating a dead horse,” said Austin Campbell, an adjunct professor at Columbia Business School who runs a consulting firm focusing on digital assets. “The one caveat is US-only exchanges could be in a world of hurt if people truly believe they are illegal and nobody will trade on them.”

--With assistance from David Pan.

(Updates exchange flow estimates in the third paragraph.)

©2023 Bloomberg L.P.