How Does Regulatory Uncertainty Affect the Valuation of a New Token?

Regulatory uncertainty creates a risk premium, depressing the token's valuation as investors factor in the possibility of a ban or severe restriction. Lack of clear legal status limits institutional adoption, reducing potential demand and liquidity.

If a token is later classified as a security, it faces strict compliance costs and potential legal action. Conversely, positive regulatory clarity can cause a sudden, sharp increase in value.

This uncertainty is a major drag on long-term price stability.