On Friday, the flagship cryptocurrency Bitcoin, along with second-largest cryptocurrency Ethereum, faced a dip in prices. This happened after news spread that the US Securities and Exchange commission was set to roll out a new bunch of regulations for the crypto sector.
For months, investors were worried that a regulatory crackdown was on its way to haunt the crypto market. Many experts predicted that in such a scenario, nervous investors would start selling all of a sudden. This can undo major profits that were accumulated thanks to the latest crypto rally.
For weeks, investors rode a bullish wave that took the prices of cryptocurrencies higher than they’d been over this past year. Unfortunately, things are looking grim for the market as the bullish trend is coming to an end. While long-term investors are not to be deterred, new traders and investors are visibly shaken and concerned about their profits.
Bitcoin Price Dips After $23,000 High
Over the past day, Bitcoin’s price fell by over 3.9 percent. After it reached a resistance level of $23,000 on Thursday, it fell below $21,681. And this was before the news surrounding scrutiny of cryptocurrency platforms by the SEC dropped prices further.
Over the last few weeks, Bitcoin was successfully maintaining a spot above the $23,000 mark. This was a crucial high point where it started a 40 percent rally at the beginning of the year. Now, however, it looks like the trend is about to correct itself.
On the other hand, Ethereum, which has been under the spotlight after the Exchange Commission’s statements, fell even lower. The second-largest cryptocurrency lost value of 6 percent, falling below $1,550.
SEC Reaches Settlement with Kraken
On Thursday, the SEC announced that it had entered a $30 million settlement with Kraken, which resulted in crypto prices tumbling. Unfortunately for investors, this move by the SEC eliminated weeks of bullish momentum.
This comes after the SEC banned staking, which is a crucial practice for sustaining cryptocurrency projects. The practice involves locking up the validator’s tokens, while allowing them to earn a commission from validating transactions. Currently, it’s the underlying process for countless Blockchain-based projects.
As of now, one of the most popular Blockchain projects to utilize the proof of stake model is Ethereum. Soon after the announcement, the blockchain’s native cryptocurrency, Ether, went down by over 6 percent. This was its lowest price point since January 19, after which it rode the bullish wave along with various other cryptocurrencies.
Ban on Staking Sends Crypto Enthusiasts in a Frenzy
Despite going on an upward trend for months, Bitcoins value reduced by over 4 percent on Friday. The flagship cryptocurrency accounts for a whopping 41 percent of the crypto market capitalization. Hence, the latest price dip came a huge shock to investors. This was the first time the token went below the $22,000 price point since a few weeks ago.
This settlement is raising concerns amid investors as to whether the Securities and Exchange Commission will continue its regulatory rampage against cryptocurrencies. In a previous statement, SEC chairman Gary Gensler elaborated that most of the cryptocurrencies on the market are securities.
In December, while speaking to Yahoo Finance, he said that the chances of crypto companies to voluntarily register themselves are growing slim. At the same time, the chief legal officer of Coinbase, Paul Grewal, expressed that the settlement with Kraken won’t affect Coinbase. Nevertheless, he requested further clarity from the SEC via tweet on Thursday.
But even though Coinbase will continue offering a staking product, their stock took a hit as investors’ feared further regulation. On Friday, their stock went down by about 3 percent, and was trading at $57.77. This is the most recent decrease in the Coinbase share price, which went down by a huge 70 percent over the previous year. This was mostly because of how most crypto prices took a hit and the “crypto winter” that took over the market.