Cardano (ADA) has found itself among the underperforming cryptocurrencies in the past 24 hours, despite the rest of the market showing some upward potential. This is attributed to the recent security claims made by the US Securities and Exchange Commission (SEC), which played a significant role in the classification of stake tokens last year.
The SEC lawsuits filed against crypto exchanges such as Binance and Coinbase this week have pointed out that some cryptocurrencies are securities, subjecting exchanges to penalties for unregistered securities trading. Cardano, a network that employs a proof-of-stake mechanism, in which users stake their native token, ADA, to secure the network and earn rewards, was named among other tokens such as MATIC, BUSD, BNB, FIL, SOL, SAND, ATOM, MANA, COTI, AXS, and ALGO. However, the SEC seems to believe more tokens can be classified as securities based on the wording “including but not limited to”.
In response to this recent classification by the SEC, the Cardano Foundation has refuted the regulatory body’s claims. On their official Twitter account, the foundation expressed their disagreement with the ADA classification as a security under US law and stated they look forward to working with regulatory bodies to achieve legal clarity and security in these matters.
Despite this pushback from the Cardano Foundation, ADA has not fared well in the market. While the general market is recovering and Bitcoin is rising above $26,000, ADA is stagnating. Among the top 10 cryptocurrencies by market capitalization, ADA is currently the worst-performing of all cryptocurrencies. While Bitcoin currently has around 3% upward potential, Cardano’s token shows a loss of 3.6%. On the weekly chart, its performance is even worse with a 9% loss in seven days.
ADA’s performance is not exceptional, given that such a classification has increased selling pressure on the digital asset. In response to the fear of potential SEC legal action, investors are understandably withdrawing some of their holdings. However, there is no indication of what the regulatory agency plans to do with the digital assets it has classified as securities.
At the time of writing, ADA is trading at a price of $0.3406, bringing the total market capitalization to $11.89 billion.