The price of Bitcoin could potentially reach $20,000 or even lower, but there is still optimism for the future of the world’s most prominent digital asset.
The action taken by the Securities and Exchange Commission against Kraken’s staking program is not necessarily an assault on staking as a whole.
Bitcoin Is Seeking Support
With the beginning of the workweek in Asia, the CoinDesk Bitcoin Price Index (XBX) declined to $21,750, while ether decreased by 1.8% to $1,514.
According to Joe DiPasquale, the founder of BitBull Capital, Bitcoin is undergoing an “underside test” since it has already lost the $23,000 and $22,000 levels. The cryptocurrency will need to reclaim the $23,000 mark to rapidly avoid dropping to $20,000.
“The market is also dependent on macroeconomic progress, and as December’s consumer prices were higher than anticipated, the market may begin to contemplate a more significant interest rate hike in the next FOMC meeting. he said in a statement.”
Bitcoin is taking regulatory changes into account while searching for support. The Securities and Exchange Commission (SEC) fined Kraken $30 million for its staking program in the United States, but not Coinbase. According to The Wall Street Journal, the SEC is also going after Paxos, with the Binance USD stablecoin being the target.
According to DiPasquale, regulations concern the cryptocurrency industry, particularly after the SEC fined Kraken $30 million. Despite this, he believes that obtaining regulatory clarity in a sluggish market is preferable to stricter regulations during a robust bull market.
Despite the current situation, DiPasquale stated that his company is optimistic about bitcoin, even if it falls below support levels. If the price falls below $20,000, his firm plans to purchase more.
Insights
DeFi is expected to remain unaffected by the SEC’s actions, which will likely benefit Ether liquid staking platforms.
Kraken and the SEC have settled staking.
Kraken has agreed to pay a $30 million penalty and to stop its U.S. service. However, staking can still be done in the U.S., an important development. Staking involves locking tokens for a period to help support the operation of a blockchain, and liquid staking involves issuing a derivative token to users representing the number of locked tokens, allowing them to access DeFi services like lending and borrowing.
Kraken’s staking service was different from other exchanges, which is why it faced action from the SEC and Coinbase did not. The SEC also did not take action against decentralized liquid staking protocols.
The SEC’s statement focuses on the issue of transparency regarding Kraken’s staking service. Although Kraken operates a large staking pool, the SEC is concerned about whether funds intended for staking are being used for that purpose or if they are being lent out instead. This lack of clarity is central to the SEC’s action against Kraken.
Liquid staking protocols like Lido and Rocket Pool can avoid the transparency issues faced by Kraken as one can track their ether coin from their wallet into the pool via a block explorer chain monitoring tools.
After Coinbase CEO Brian Armstrong tweeted about the SEC’s interest in staking, the value of liquid staking tokens like Lido’s LDO increased. This value surged again after Kraken’s U.S. staking service was shut down.
There are different explanations for the surge of liquid staking tokens after the SEC’s interest in staking was made public. Some think it could be due to the SEC’s “Yellow Light” towards staking, which only allows staking as a technical service and not an investment strategy.
Crypto lawyer Gabriel Shapiro explained that validation-as-a-service is a ministerial tech service, not an earning program. Despite the surge, the total value locked in liquid staking protocols did not increase significantly. For example, the total value locked in Lido has locked stable since the beginning of the year.
