Kraken Crypto Staking Settlement Bedevils Markets as Bitcoin Hangs Below $21.9K
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Good morning. Here’s what happens:
Prices: Bitcoin swings below $22,000 after crypto exchange Kraken agrees to suspend its crypto venture; altcoins fell, although liquid staking tokens were an exception.
Insight: Whales send bitcoin back to exchanges, while retail investors remove the asset. What could the trend mean?
Prices
CoinDesk Market Index (CMI)
1036
−39.8 ▼ 3.7%
Bitcoin (BTC)
$21,827
−1143.2 ▼ 5.0%
Ethereum (ETH)
$1546
−108.9 ▼ 6.6%
S&P 500
4,081.50
-36.4 ▼ 0.9%
Gold
$1860
-17.6 ▼ 0.9%
Nikkei 225
27,584.35
-22.1 ▼ 0.1%
BTC/ETH prices per CoinDesk indices, as of 07:00 ET (11:00 UTC)
A Kraken settlement, fresh regulatory concerns and a crypto slump
So much for $24,000. Or $23,000.
In a 24-hour period that raised fresh concerns about the future of crypto regulation, bitcoin fell to $21,827, a drop of more than 5% that sent the biggest cryptocurrency to its lowest level in about two weeks. Much of the decline came after crypto exchange Kraken agreed to “immediately” end its crypto-staking-as-a-service platform for US customers and pay $30 million to settle Securities and Exchange Commission (SEC) charges it offered unregistered securities.
“Today’s action should make clear to the market that staking-as-a-service providers must register and provide full, fair and truthful disclosure and investor protection,” SEC Chairman Gary Gensler said of the settlement.
In an interview with CoinDesk TV, Brett Sifling, an investment advisor at wealth management firm Gerber Kawasaki, highlighted the need for improved regulation to help “crypto really go to the next level.”
“Innovation has outpaced the legislation that our government has advanced,” Sifling said. “We need some blood, a sign of confidence that our government is going to support us and that it’s not just going to be the Wild West out there with a bunch of criminals in the business, because ultimately it hurts the common the person.”
He added: “If we want widespread adoption, we need to have these rules in place so that eventually we can build and have the confidence to put investments into the market and know that they’re not going to disappear one day when you wake up .”
Ether, the second-largest crypto by market cap, behaved similarly, falling from its previous support comfortably above $1,600 to around $1,546, down 6.6% from the same time on Wednesday, which was part of a wider market decline. The drop off from a five-week peak began after Coinbase CEO Brian Armstrong tweeted on Wednesday that his firm had heard rumors that the SEC wanted to ban retail investors from engaging in crypto-staking, the revenue-generating technique at the heart of running blockchains including Ethereum.
Most other cryptos spent the day in solid negative territory, although liquidity staking tokens were an exception, as LDO, the governance token of Lido Finance, the largest liquid staking protocol with around $8.4 billion of ether (ETH) staked on the platform , jumping 10.4% for an hour at one point. LDO recently increased by approx. 2%. LDO competitor Rocket Pool’s RPL and less liquid staking platform tokens such as Persistence’s pSTAKE and StaFi’s FIS all rose nicely in the wake of the Kraken announcement.
Stock markets unaffected by the crypto news fell more mildly with the tech-heavy Nasdaq and the S&P 500, which has a strong technology component, each falling around 1%. Investors had sent stocks higher earlier in the day after an encouraging rise in weekly jobless claims suggested the hot labor market may finally be cooling and the U.S. Federal Reserve’s monetary aggressiveness was working to keep inflation at bay. The jobs numbers have remained stubbornly positive for several months, even as other indicators have suggested an economic slowdown that historically leads to lower prices.
Gerber Kawasaki’s Sifling was cautiously optimistic about crypto’s path forward, noting that bitcoin had been trading in a narrow range for months. “Crypto has had a great run this year. Inflation is easing. Macro factors are improving. But it’s still really ranged, since August. I wouldn’t get too excited yet until we get out of this range.”
Biggest winners
There are no winners in the CoinDesk 20 today.
Biggest losers
Insight
Whale investors sending more Bitcoin to exchanges
Bitcoin “Whales”, investors who have over 1000 BTC, are starting to move bitcoin back to centralized exchanges.
The trend comes even though activity in the chain shows that smaller investors are removing BTC from exchanges.
Since coin movements from exchanges are generally bullish, while the opposite is bearish, one interpretation is that both major and minor investors are wrong about which way the market is headed with the former too pessimistic and the latter overly optimistic.
However, the other interpretation is that whales are simply managing the downside risk because they potentially have more to lose. Regardless, many market watchers will likely continue to see the trend.
Important events.
15:00 HKT/SGT (7:00 UTC) UK Gross Domestic Product (QoQ)
21:30 HKT/SGT (13:30 UTC) Canada net change in employment (January)
23:00 HKT/SGT (15:00 UTC) Michigan Consumer Sentiment Index (February)
CoinDesk TV
In case you missed it, here’s the latest episode of “First Mover” on CoinDesk TV:
Bitcoin Exchange LocalBitcoins To Close; Hermès wins trademark lawsuit against MetaBirkin’s NFTs
Bitcoin exchange LocalBitcoins is set to shut down its service this month in response to the “ongoing very cold crypto winter.” Okcoin Chief Operating Officer Jason Lau shared his crypto market analysis. In addition, Enclave Markets general counsel Olta Andoni weighed in after a nine-person jury in the copyright infringement trial between Hèrmes and NFT artist Mason Rothschild ruled in favor of the French luxury brand. SALT Lending CEO Shawn Owen also joined the conversation as the crypto lender raises $64.4 million to resume operations.
Headings
Kraken shuts down crypto-staking service, pays $30 million fine in SEC settlement: The announcement from the SEC confirms a CoinDesk scoop from earlier Thursday.
Bitcoin Punks: Ordinal NFT Collection Rises in Value: Late Wednesday, an Ordinal Punk NFT minted on the Bitcoin-native Ordinals Protocol was sold for 9.5 BTC, roughly $214,000.
Three Arrows Capital Founders launches exchange where you can trade 3AC bankruptcy claims: The platform, called Open Exchange, aims to be a home for trading what it says is a $20 billion market of claims against bankrupt crypto firms, including those of 3AC.
DeFi Giant MakerDAO Integrates Blockchain Data Provider Chainlink for DAI Stablecoin: Chainlink Automation will run specific tasks, including price updates and liquidity balancing, to help maintain the stability of Maker’s $5 billion DAI stablecoin.
Aave Deploys Native Stablecoin GHO on Ethereum Testnet: GHO joins an increasingly competitive field as rival DeFi protocols also issue or move to issue their own protocol-based stablecoins.
