ALGO Algorand Token Drops Sharply Amid SEC Classification and Declining DeFi Activity
Date: 2023-08-22 Author: Karina Ziganova Categories: BLOCKCHAIN, IN WORLD
Algorand's ALGO token price has fallen to new lows since the epic cryptocurrency market crash on August 17th.
Last Thursday, the digital asset fell to an all-time low of $0.08846. While its value has since recovered to $0.09673 at press time, market sentiment around the asset remains negative.
Why the cost of ALGO is falling
Earlier this year, the SEC classified the ALGO token as a security as part of its charges against the US-based crypto exchange Bittrex. This classification has significant implications for the financial regulations that the token and its holders face.
Despite strong opposition from its Fund, ALGO has experienced a decline in demand due to investor hesitation for assets without a clear regulatory status. This has caused the value of the token to drop over 87% since classification.
Prior to the SEC classification, the Algorand ecosystem ran into trouble when MyAlgo, a well-known wallet in the ecosystem, was hacked in March. The incident resulted in more than $10 million in losses, shattering confidence in the network's security measures.
Despite the drop in ALGO's value, Algorand Foundation CEO Stacey Warden remains optimistic, believing the network's ability to continue to attract developers is a positive sign for its future.
DeFi Activity Kiosks
Meanwhile, the price decline comes amid falling DeFi activity on the network. DeFillama data shows that the total value of assets locked on the blockchain has fallen to less than $50 million after peaking at over $200 million in February.
Interestingly, the drop in TVL is not just a result of the drop in ALGO prices. In July, Algorand's largest decentralized finance protocol, Algofi, said it would wind down its operations due to its inability to maintain the platform. At its peak, the DeFi platform accounted for over 50% of Algorand's DeFi activity.
The sudden closure of Algofi seriously affected the credibility of other protocols that were still looking to attract new users to their platforms.
