How the SEC Ruling Caused a Major Crypto Market Dip
The Securities and Exchange Commission (SEC) has declared tokens associated with popular blockchains to be securities in complaints against Coinbase and Binance. This declaration has resulted in a significant dip in prices for those tokens on Friday, leading to a huge sell-off by major crypto market makers and traders, including Cumberland, Jump Trading, and Robinhood. The result has been a plunge in prices, with SOL down nearly 30%, MATIC down 28%, and ADA down 29.5% in just seven days. Other well-known blockchains, including Filecoin and Internet Computer, also suffered price drops as they were classified as securities by the SEC.
According to the SEC, this declaration was long overdue as the crypto industry had been lacking guidance in determining which tokens qualified as securities. The SEC’s litigation against Ripple, which is associated with the XRP token, is expected to provide clarification on the issue this summer. However, this declaration has caused significant market instability, which may take some time to recover.
Additional Piece – The Future of Crypto in a Regulated Environment
The crypto industry has been broadly divided on the issue of regulation. On the one hand, crypto enthusiasts have long touted the unregulated nature of the industry as one of its key selling points. On the other hand, skeptics have argued that the lack of regulation makes crypto an inherently risky investment. The SEC’s recent declaration on tokens as securities has only intensified this debate, raising questions about the future of crypto in a regulated environment.
For some crypto enthusiasts, the SEC’s declaration is a sign of crypto’s growing legitimacy in the eyes of regulators. As the industry continues to mature, they argue, regulation will become increasingly important in placating skeptics and attracting mainstream investors. Already, several major financial institutions, including JPMorgan and Goldman Sachs, have announced plans to offer crypto-related products to their clients. In this view, the future of crypto lies in working with regulators to establish clear standards for tokens and protect investors from fraudulent activity.
However, there are also concerns that excessive regulation could stifle innovation in the crypto industry. Many startups and entrepreneurs have turned to crypto as a means of raising capital without having to navigate the complex rules associated with traditional finance. If regulation becomes too burdensome, they argue, it could drive these innovators away, leaving the industry stagnant and limiting its potential for growth.
Ultimately, the future of crypto in a regulated environment will depend on striking a balance between these two perspectives. Regulators will need to establish clear standards for tokens and take steps to protect investors from fraudulent activity. At the same time, they must avoid overburdening the industry with excessive regulation that stifles innovation and growth. If regulators can find this balance, the future of crypto could be bright indeed.
Summary
The SEC has declared tokens associated with popular blockchains to be securities in complaints against Coinbase and Binance. This has resulted in a significant dip in prices for those tokens on Friday, leading to a huge sell-off by major crypto market makers and traders, including Cumberland, Jump Trading, and Robinhood. The result has been a plunge in prices, with SOL down nearly 30%, MATIC down 28%, and ADA down 29.5% in just seven days. Other well-known blockchains, including Filecoin and Internet Computer, also suffered price drops as they were classified as securities by the SEC. The crypto industry has long lacked guidance on determining which tokens qualify as securities, but the SEC’s actions have prompted both excitement from crypto enthusiasts and concerns that excessive regulation could stifle innovation in the industry’s startups and entrepreneurs.
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The price of tokens tied to some of the most popular blockchains plummeted on Friday after the Securities and Exchange Commission declared them to be securities in complaints filed against them Coinbase And binance. While Bitcoin and Ethereum saw only minor dips, while other well-known crypto projects suffered a setback.
As of Sunday evening, the price of Solana’s SOL token fell nearly 30% in seven days, while Polygon’s MATIC token and Cardano’s ADA fell 28% and 29.5%, respectively, over the same period.
While crypto prices tumbled across the board following the SEC complaints that fell last Monday and Tuesday, a massive sell-off in markets only occurred on Friday.
The cause of Friday’s crash appears to be the decision by some of the largest crypto marketmakers and trading firms to divest their holdings. A coin desk report showed tweets by analytics firm LookOnChain, which referenced blockchain data and said that wallets tied to Cumberland, Jump Trading and Robinhood had moved a large amount of tokens to exchanges.
The large holdings of these companies, combined with an illiquid trading environment, may have caused prices to fall particularly sharply, according to the SEC statement. Meanwhile, Robinhood announced on Friday it would be delisted Solana, Cardano, and Polygon were delisted on June 27 in another likely blow to their value.
Solana and Cardano are so-called Layer 1 blockchains that aim to challenge Ethereum, while Polygon is a “side-chain” that helps process Ethereum transactions more efficiently. While they suffered the biggest price drop, other well-known blockchains also took a major hit in the wake of the SEC complaints.
The seven-day price of tokens tied to Filecoin and Internet Computer — both of which the SEC also classifies as securities — fell 26% and 24%, respectively, on Sunday. Meanwhile, a number of well-known legacy projects, notably Litecoin and Dogecoin, were not classified as securities and are down around 15%.
The crypto industry has long complained that it believes it lacks SEC guidance when it comes to determining which blockchain tokens are securities. The subject is the subject of careful observation litigation between the agency and Ripple, which is linked to the XRP token. A decision is expected in the summer.
Bitcoin, down 4% over the past week, is the only token the SEC has classified as a non-security. Ethereum, whose legal status is unclear, is down 7%. Measured by market capitalization, the two tokens are by far the largest cryptocurrencies.
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https://fortune.com/crypto/2023/06/11/solano-cardano-and-polygon-plunge-nearly-30-as-big-firms-dump-holdings-after-sec-allegations/
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