Ethereum’s native token, Ether (ETH), experienced its worst daily performance of the year when the US Securities and Exchange Commission (SEC) blocked Kraken, a cryptocurrency exchange, from offering cryptocurrency staking services.
On February 9, Kraken agreed to pay $30 million to settle the SEC’s allegation that it violated securities rules by offering cryptocurrency staking services to US retail investors.
The news drove down the prices of many Proof-of-Stake (PoS) blockchain project tokens, in particular. Ethereum, which switched to a staking-based protocol in September 2022, has also suffered.
On February 9, the price of ETH plunged nearly 6.5% to around $1,525, the biggest single-day drop since December 16 of last year.
Will Ethereum Staking Survive the SEC Crackdown?
The SEC’s crackdown on cryptocurrency staking begins as Ethereum awaits the release of its key network upgrade, dubbed Shanghai, in March.
The update will finally allow Ether validators, entities that have locked ETH tokens worth approximately $25.6 billion on the Ethereum PoS smart contract, to withdraw your assets along with performance rewards.
As a result, Shanghai is seen as a bullish event for Ether by several analysts, including Bitwise Asset Management Chief Investment Officer Matt Hougan.
“Today, many investors who would like to bet on ETH and earn a return are sitting on the sidelines. After all, most investment strategies cannot tolerate an indefinite lockup.” wrote Hougan in his letter to investors in January, adding:
“So most investors stay out of the market. But once that indefinite block is lifted, the percentage of investors willing to stake their ETH will skyrocket.”
But doubts have been raised about the future of crypto gambling in the US, with Brian Armstrong, the CEO of cryptocurrency exchange Coinbase, fearing that the SEC would ban gambling for retail investors in the future.
1/ We are hearing rumors that the SEC would like to get rid of cryptocurrency staking in the US for retail clients. I hope that is not the case, as I think it would be a terrible path for the US if that were allowed to happen.
—Brian Armstrong (@brian_armstrong) February 8, 2023
Furthermore, some analysts argue that the ban on Ether staking services will force users to move away from Ethereum.
Notably, Ethereum requires interested parties to deposit 32 ETH (~$50,000) into its PoS smart contract in order to be a validator. As a result, retail investors often use third-party staking services that pool smaller amounts of ETH to enable validator status.
“If the SEC bans cryptocurrency staking for the public, then most Ethereum validators will have to pull out.” argues Independent analyst Ripple Van Winkle, adding:
“Because you need 32 ETH to stake. Which means the ETH network will experience problems.”
ETH Price Sees Bearish Rejection
From a technical perspective, the ether price is positioned for a possible 20% price correction in February.
Related: Bitcoin Price Hits 2-Week Low Amid $22.5K Loss Warning Means Another Drop
Notably, on the daily chart, the ETH price has seen a reversal move after testing its multi-month downtrend line for resistance. You now have the 200-day exponential moving average (200-day EMA; the blue wave) near $1,525 as support.
Ether is at risk of falling below the wave of support at the 200 day EMA due to its negative market fundamentals. Such a scenario includes the next downside target at $1,200, which coincides with multi-month rising trendline support.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
