On February 9, the price of ETH plunged nearly 6.5% to around $1,525, the biggest single-day drop since December 16 last year.
Ethereum’s native token Ether (ETH) posted its worst daily performance of the year when the US Securities and Exchange Commission (SEC) banned cryptocurrency exchange Kraken 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 PoS (Proof-of-Stake) Blockchain project tokens, in particular. Ethereum, which switched to a staking-based protocol in September 2022, was also affected.
Will Ethereum Staking Survive the SEC Crash?
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 enable Ether validators – entities that have locked up approximately $25.6 billion worth of ETH tokens in the Ethereum PoS smart contract – to withdraw their assets along with performance rewards.
As a result, a number of analysts, including Bitwise Asset Management chief investment officer Matt Hougan, see Shanghai as a bullish event for Ether.
“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 freeze,” wrote Hougan in his January letter to investors, adding the following:
“Therefore, most investors are left out of the market. But once that indefinite hold is lifted, the percentage of investors willing to put their ETH on the line will explode.”
Doubts have been raised about the future of cryptocurrency participation in the US, however, with Brian Armstrong, CEO of cryptocurrency exchange Coinbase, fearing that the SEC would ban retail investor participation in the future.
Furthermore, some analysts argue that banning Ether staking services will force users away from Ethereum.
Specifically, 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.
ETH Price Sees Bearish Rejection
From a technical point of view, the Ether price is positioned for a possible 20% price correction in February.
Notably, on the daily chart, the ETH price has pulled back after testing its multi-month downtrend line for resistance. You now have the 200 day EMA (200 day EMA; the blue wave) near $1525 as support.
Ether is at risk of breaking below the wave of support at the 200 day EMA due to its negative market fundamentals. That scenario includes the next downside target at $1,200, which coincides with multi-month rising trendline support.
By Audy Castaneda
