Ethereum price risks 20% correction amid SEC crackdown on crypto stakes

Ethereum’s native token, Ether (ETH), saw its worst daily performance of the year when the US Securities and Exchange Commission (SEC) stopped Kraken, a cryptocurrency exchange, from offering crypto staking services.

On February 9, Kraken agreed to pay $30 million to settle the SEC’s allegation that it violated securities rules by offering crypto betting services to US retail investors.

The news pushed down the prices of many proof-of-stake (PoS) blockchain project tokens, in particular. Ethereum, which transitioned to a stake-based protocol in September 2022, also suffered as a result.

On February 9, ETH’s price plunged nearly 6.5% to around $1,525, the biggest one-day decline since December 16 last year.

Will Ethereum Stakes Survive SEC Crackdown?

The SEC’s crackdown on crypto efforts 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 $25.6 billion worth of ETH tokens into Ethereum’s PoS smart contract – to withdraw their holdings along with ROI rewards.

As a result, several analysts, including Bitwise Asset Management’s Chief Investment Officer Matt Hougan, consider Shanghai a bullish event for Ether.

“Today, many investors who want to stake ETH and earn returns are sitting on the sidelines. After all, most investment strategies cannot tolerate an indefinite lock-in,” Hougan wrote in his letter to investors in January, adding:

“So, most investors stay out of the market. But once the indefinite lock-in is removed, the percentage of investors willing to stake ETH will explode.”

But doubts have emerged about the future of crypto betting in the US, with Brian Armstrong, CEO of Coinbase crypto exchange, fearing the SEC would ban betting for retail investors in the future.

Moreover, some analysts claim that the ban on Ether staking services will force users to move away from Ethereum.

Specifically, Ethereum requires stakers to deposit 32 ETH (~$50,000) into its PoS smart contract to be a validator. As a result, retail investors often use third-party staking services that collect smaller amounts of ETH to activate validator status.

“If the SEC Bans Public Crypto Betting, A Majority of Ethereum Validators Will Have to Come Down,” argues independent analyst Ripple Van Winkle, adding:

“Because you need 32 ETH to bet. That means the ETH network is going to experience problems.”

ETH price sees bearish rejection

From a technical perspective, the Ether price is positioned for a potential 20% price correction in February.

Related: Bitcoin Price Hits 2-Week Low Amid Warning of $22.5K Losses Mean Another Plunge

Notably, on the daily chart, the ETH price has undergone a pullback move after testing its multi-month descending trendline as resistance. It is now holding the 200-day exponential moving average (200-day EMA; the blue wave) near $1,525 as support.

Ether risks falling below the 200-day EMA support wave due to negative market fundamentals. One such scenario includes the next downside target at $1,200, which coincides with a multi-month rising trendline support.

This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making a decision.