The recent enforcement actions taken by the U.S. Securities and Exchange Commission (SEC) against leading cryptocurrency exchanges have had a significant impact on the market. Alongside the actions, the agency also identified several cryptocurrencies, including Algorand (ALGO) and Flow (FLOW), as unregistered securities, resulting in a sharp drop in their value. Other prominent altcoins such as Polygon (MATIC), Solana (SOL), and Cardano (ADA) have also experienced significant declines.
SEC continues crackdown as ALGO and FLOW post low figures
Over the weekend, both ALGO and FLOW reached all-time lows, trading at $0.098 and $0.459, respectively, according to CoinGecko. These prices represent a substantial decrease from their highs of $0.29 and $1.39 in February. In just seven days, both coins plummeted by over 28%, hitting the lowest price points in their histories.
The agency’s lawsuit against Binance and Coinbase drew attention to the inclusion of ALGO and FLOW, respectively. However, it is important to note that the organizations associated with these tokens are not named defendants in the lawsuits. Algorand, founded by renowned computer scientist Silvio Micali in 2017, was designed as a fast and scalable platform for decentralized applications. Currently ranked 48th by market capitalization, the total value of Algorand’s native token, ALGO, stands at around $796 million.
The agency previously classified ALGO as security in charges filed against crypto exchange Bittrex in April. Comments made by its Chair Gary Gensler during his time as a professor at MIT, where he spoke favorably about Algorand, caused controversy within the industry. Critics accused Gensler of promoting the project due to his previous affiliation with the organization.
Both the Binance and Bittrex lawsuits highlight an unregistered securities offering conducted by the Algorand Foundation in 2019, where ALGO was sold at $2.40 per token. The SEC claims that this offering constituted an investment of money in a common enterprise with the expectation of profits derived from the efforts of others.
Regulatory crackdown causes a ripple effect on the market
Despite the securities classification, the Algorand Foundation has disputed this characterization, stating in April that clear regulatory guidelines would be beneficial for the crypto industry. According to data from IntoTheBlock, nearly every digital wallet holding ALGO is currently in the red. Out of 17.75 million token holders, only 28 addresses show a positive balance at the time of writing.
The SEC’s classification of FLOW as a security also had a significant impact. Focusing on Dapper Labs, the Canadian firm behind the Flow blockchain, the SEC claims that the network’s growth and the appreciation of FLOW’s value are attributed to Dapper Labs’ support. Flow is used for staking, transaction fees, and trading digital collectibles within the network.
Ranked 74th by market capitalization with a total value of $21 million, FLOW has plummeted by more than 98% since its all-time high in April 2021. The SEC’s lawsuit against Coinbase mentions that FLOW has been available on the platform since May of last year. It also points out that Coinbase Ventures, the venture arm of Coinbase, participated in an early fundraising round for Dapper Labs.
While the challenges faced by the respective networks of ALGO and FLOW contribute to their declining values, the SEC’s lawsuits against Coinbase and Binance have undoubtedly intensified the downward trend. As the regulatory status of altcoins comes into question, investors and industry participants are closely monitoring the outcome of these lawsuits and the potential implications for the broader cryptocurrency market.
