Cryptocurrencies like Bitcoin, Ethereum or Solana ended the week lower because of the the U.S. Securities and Exchange Commission (SEC) announcement about the closure of the staking program of the second largest cryptocurrency exchange in the U.S., Kraken.

Staking is a service that allows investors to earn passive income from cryptocurrencies, ‘locked’ in the blockchain where they help process transactions and keep the network liquid. Bitcoin was slipping below $22,000, while Ethereum was around $1550.

SEC chief Gary Gensler said the SEC’s decision was dictated by concern for the safety of investors, who in the past often lost their funds by giving them to centralized cryptocurrency exchanges to manage.

Kraken exchange will pay a $30 million fine for failing to register its staking program in accordance with SEC law for securities. Staking in the US is likely to be impossible for retail investors due to which Coinbase (COIN.US) shares were also losing, some analysts indicated that the exchange will derive additional revenue from the launch of a public Ethereum staking program.

At the same time, an investigation will be launched into Paxos and Circle, the entities behind stablecoins i.e. cryptocurrencies that mimic the US dollar BinanceUSD (BUSD) and CircleUSD (USDC).

Both declared full 1:1 coverage with the dollar, but regulators are likely to have spotted irregularities because they will send both companies a so-called ‘wells’ notice – sent after investigations are completed to offending entities.

Ethereum tests major resistance level

JPMorgan indicated that the ‘Shanghai upgrade‘ which will allow Ethereum staking investors from December 2020 to cash out their cryptocurrency and staking rewards will cause the number of validators (ETH stakers) to eventually increase from 0.5 million to 2.2 million, and the average annual yield to drop from 7.4% on friday to around 5% (more people to distribute rewards).

A 5% yield from staking may have sounded attractive when interest rates were near zero. Today, banks are offering more attractive interest rates, and institutions with access to ‘fixed income’ instruments may be considering other opportunities to generate passive income while minimizing risk.

Concerns have been raised among investors that Ethereum will be classified as a ‘security’ by the SEC. This was suggested earlier by Gary Gensler, pointing to all Proof of Stake projects as potentially being under the jurisdiction of the Securities and Exchange Commission (SEC).

The SEC chief argued that staking gives investors the opportunity to profit through third-party assets which classifies PoS as subject to the SEC.

According to ETH co-founder and ConsenSys founder Joe Lubin, it is highly unlikely that the SEC would start regulating Ethereum because it would cause a huge uproar among regulators, politicians and the industry and Washington is now focusing its attention on so-called stablecoins.

Lubin cited that he had been privy to discussions with the SEC and the Commodity Futures Trading Commission CFTC for many years.

Ethereum price has dropped below the 100 and 200 session moving averages, forming a so-called death cross on the H1 interval. The RSI has cooled and stands at 27 points signaling an oversold level. After falling below the 71.6 Fibonacci retracement of the upward wave started in November 2022, the next resistance may turn out to be the 61.8 level near $1460. Source: xStation5