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While there have been ups and downs, the overall digital asset market has performed quite well year-to-date, with top projects like Bitcoin sitting on gains nearing 70%. Along the way, this activity has reinvigorated communities and sentiment backing a variety of projects that were once at risk of fading into irrelevance. Somewhat surprisingly, one of the few projects that has not been able to pull off such a turnaround is none other than Algorand (ALGO). Why is this the case?
If you follow the digital asset market at all, you will have no doubt heard that regulatory uncertainty continues to be an ongoing concern. In fact, it has become such a hot-topic that in the United States that a litany of companies involved with digital assets have exited the countries borders, pushing out talent and opportunity.
With regards to Algorand, this uncertainty reared its head in mid-April when the Securities and Exchange Commission (SEC) named the project in a lawsuit levied against the once-popular centralized exchange, Bittrex. The SEC stated,
“From the time of its offering and continuing through the Relevant Period, ALGO was offered and sold as an investment contract and therefore a security.”
Naturally, being named in the aforementioned lawsuit has resulted in Algorand having a dark cloud surrounding it. This has meant that any potential growth and interest in the project has found its way elsewhere to top competitors. When looking at the chart below, it is clear to see the immediate shift in sentiment in mid-April when this news broke, and the resulting exodus of capital from the project.
This development was found to be particularly frustrating by the Algorand community, as it just further highlighted inconsistencies in commentary made over the years by SEC Chairman Gary Gensler, who at various points has promoted the project in a public forum, such as during a speech given in 2019 at a conference held by MIT. This promotion comes in stark contrast to now condemning the project for its structuring, capital raises, team commentary, and more.
Algorand may very well be a security. If listening to those involved with digital assets though, and they will tell you that such designations are simply not that clear cut. With this being the case, a win for Algorand moving forward may be to just keep its head afloat until clarity is provided.
It should be noted that Algorand is not navigating these regulatory waters alone. In the same boat are various other high-profile projects such as Ripple (which has very publicly been pushing back against the SEC for ages now), Dash, OmiseGo, and more.
Speaking of competitors, Algorand has more than a few – each of which only further highlight the missed opportunity that has come with the change in market sentiment. Here are a few examples, listed alphabetically, and the performance of each at time of writing compared to Algorand.
|Algorand (ALGO)||-1.2% YTD|
|Avalanche (AVAX)||+53% YTD|
|Cardano (ADA)||+55% YTD|
|EOS (EOS)||+16% YTD|
|Ethereum (ETH)||+53% YTD|
|Polkadot (DOT)||+30% YTD|
|Solana (SOL)||+120% YTD|
|Tron (TRX)||+24% YTD|
Boasting various examples of promising adoption, along with increased interoperability with other projects, it would be reasonable to assume that without being deemed a security Algorand would be somewhere in the mix with each of these other top-projects.
Instead, it is now languishing in a state of regulatory purgatory, unable to capitalize on the growing market.
When looking at the price action of each of the projects highlighted above, it is clear to see just how detrimental regulatory uncertainty can be to a project. Despite boasting an impressive feature-set, and a large following, Algorand has simply not been able to keep up with the pack.
With that being said, recent pressure being placed on regulators to provide clarity, inquiries by Congress, and the denouement of Ripple Vs. SEC soon to arrive may change all of this. If a positive outcome is achieved, Algorand and its native token ‘ALGO' may soon represent one of the best buying opportunities within the sector; if a negative outcome occurs, expect for many similarly structured projects to also begin showing signs of being left behind.
To learn more, make sure to visit our Investing in Algorand guide.
Joshua Stoner is a multi-faceted working professional. He has a great interest in the revolutionary 'blockchain' technology.