Bitcoin drops below $26,000 after SEC sues crypto exchange Binance

Cryptocurrency prices dropped Monday after the U.S. Securities and Exchange Commission charged Binance, the largest crypto exchange in the world, with violating securities laws.

Bitcoin fell 5.5% to $25,662.50, its lowest level since March, according to Coin Metrics.

Ether slid 5.1% to $1,807.79. Binance Coin, a token used to pay transaction and trading fees on the Binance exchange, tumbled 9.5%.

The declines came after the SEC alleged Binance and its co-founder, Changpeng Zhao, comingled billions of dollars of investor funds with their own and violated securities laws. The complaint follows a similar one against Binance from the Commodity Futures Trading Commission earlier this year.

“Binance is the largest cryptocurrency exchange by trading volume so it’s no surprise that the market is responding the way it is to the news,” Sam Callahan, lead analyst at bitcoin services company Swan Bitcoin, told CNBC. “Any regulatory action against a major player in the cryptocurrency space creates uncertainty and leads to increased market volatility in the short term.”

“However, such volatility is often temporary, and prices may recover once the market absorbs the news,” he added. “Long term this can be seen as a healthy development for the ecosystem as bad actors are cleansed out, and capital flows out of cryptocurrencies with significant regulatory risk and into bitcoin.”

The suit is the latest development in this year’s crackdown on the crypto industry by U.S. regulators. Since January, the SEC has charged Kraken, Genesis and Gemini Trust with offering unregistered securities to investors and has warned Coinbase of potential securities charges.

Bitcoin last week capped its worst month of trading since November, finishing May down 7.9% after trading in a narrow range of between $26,000 and $28,000. Technical analysts see $25,200 as the key level to watch for bitcoin on the downside.