Crypto Plunge: Just a Correction, or Has the MiCA Effect Begun?

▲ Cryptocurrency Losses and the MiCA Effect: What Is the Market Pricing In?/ChatGPT-generated image

The recent sharp decline in cryptocurrencies may not simply be another cycle of volatility but could signal a “structural repricing” triggered by the implementation of the European Union’s crypto regulation, MiCA (Markets in Crypto-Assets), according to analysis.

On February 13 (local time), investment media outlet FXStreet reported that over the past several months, steep declines in parts of the crypto market have been more pronounced in mid- and small-cap tokens, certain ecosystem assets, and structures heavily reliant on stablecoins, rather than in Bitcoin (BTC) volatility. This suggests that rather than a routine cyclical adjustment, regulatory and governance risks stemming from the phased rollout of MiCA may be starting to be priced in.

Until now, crypto downturns have largely been explained by three factors: global liquidity conditions, risk appetite, and increased internal leverage. However, analysts now point to a fourth variable—“regulatory structure.” MiCA represents a comprehensive regulatory framework covering issuer obligations, stablecoin governance, market conduct standards, disclosure and marketing requirements, and operational requirements for service providers, imposing institutional-level accountability within the European market. The market, they note, cannot help but respond sensitively to structural changes such as rising costs and reduced opacity.

The stablecoin sector has been identified as an area directly affected. MiCA strengthens requirements for reserves, custody standards, transparency reporting, and transaction monitoring. In this process, liquidity fragmentation and reduced trading efficiency may temporarily emerge, and thinner liquidity could lead to heightened volatility. Exchanges targeting European investors are now required to reorganize their stablecoin listings and operational structures to align with regulatory standards.

Market repricing can be divided into two broad categories. One is “macro repricing,” driven by variables such as interest rate expectations, a strong dollar, ETF fund flows, and risk-off sentiment. The other is “regulatory repricing,” influenced by compliance obligations, operational restructuring, legal uncertainty, and capital shifts toward regulation-friendly exchanges. In the latter case, mid- and small-cap tokens with weak governance and reliance on regulatory arbitrage may face relatively greater downward pressure. This indicates that the market is beginning to factor not only narratives but also regulatory compliance and structural soundness into asset pricing.

The outlet interprets this as the crypto market entering an “institutionalization phase.” In the short term, volatility may increase due to rising compliance costs, liquidity reallocation, and investor reassessment. However, in the medium to long term, enhanced investor confidence and expanded institutional capital inflows are expected. Recent losses may therefore represent not a signal of structural collapse, but a transitional adjustment reflecting governance and sustainability in prices—suggesting the market is passing through a period of “change,” not “chaos.”

Disclaimer: This article is for investment reference only and accepts no responsibility for investment losses based on it. The content should be interpreted solely for informational purposes.