Price of Blockchain Tokens Plummet After SEC Declares Them Securities
Blockchain tokens saw a significant drop in price following lawsuits filed by the Securities and Exchange Commission (SEC) against major exchanges like Coinbase and Binance. While Bitcoin and Ethereum experienced only minor dips, other notable projects took a beating.
Token Price Drops
As of Sunday evening, the price of Solana’s SOL token was down nearly 30% over seven days, while Polygon’s MATIC token and Cardano’s ADA were down 28% and 29.5%, respectively, over the same period. Filecoin and Internet Computer, both labeled as securities by the SEC, fell by 26% and 24%, respectively. Meanwhile, Litecoin and Dogecoin, which were not labeled as securities, fell by around 15%.
Cause of the Drop
The cause of Friday’s price drop appears to be a decision by some of the largest crypto market makers and trading firms to dump their holdings. Trading firms like Cumberland, Jump Trading, and Robinhood off-loaded a large volume of tokens to exchanges. These firms’ large holdings, combined with an illiquid trading environment following the SEC declaration, likely led to an especially steep drop in prices.
Robinhood also announced it would delist Solana, Cardano, and Polygon from its exchange as of June 27, which could further impact their value.
Layer 1 Blockchains and Side-Chains
Solana and Cardano are Layer 1 blockchains that aspire to challenge Ethereum, while Polygon is a side-chain that helps process Ethereum transactions more efficiently. While they took the biggest price hit, other well-known blockchains also experienced a big blow in the wake of the SEC complaints.
The crypto industry has protested against the SEC’s lack of guidance when it comes to determining which blockchain tokens are securities. This issue is the subject of a closely watched legal battle between the agency and Ripple associated with the XRP token. A decision is expected this summer.
The SEC has stated that Bitcoin is not a security. However, Ethereum’s legal status is unclear, and it experienced a 7% decline, while Bitcoin experienced a 4% drop over the past week.
The SEC lawsuits caused a significant drop in the token prices of numerous blockchain projects. The market crash was caused by large firms and trading firms dumping their holdings. The SEC’s lack of guidance and unclear legal status of some tokens has been an ongoing issue in the crypto industry. Meanwhile, Bitcoin and Ethereum saw minor dips in their market prices.