The crypto market falls after Kraken settles with the US SEC
After the SEC accused California-based cryptocurrency exchange Kraken of offering an unregistered crypto staking program, calling it a violation of US securities law – panic spread across the broader cryptocurrency market. Market participants and crypto enthusiasts are currently in the dark as to whether staking would be completely eradicated by the country’s financial watchdog.
The crypto market is falling
Despite a similar rumor having been tweeted by Coinbase CEO Brian Armstrong earlier today, the SEC’s direct action sent shockwaves through the crypto market. This caused the price of Bitcoin (BTC)
to fall by approx. 4% in the last hour, bringing it back to the $21k level. After hearing that the exchange would disable the staking feature, a total of about $30 billion in funds left the cryptocurrency market.
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Moreover, after trading above $23,000 earlier this week, Bitcoin was down to nearly $21,500 by 3:30 p.m. in New York. Altcoin supremo Ethereum also fell more than 5%, while other tokens such as Avalanche (AVAX) and Dogecoin (DOGE) experienced declines of over 8%.
SEC Chairman Gary Gensler said in a statement that:
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.
Looming fears about DeFi are growing
On several blockchains, including Ethereum, the proof-of-stake (PoS) method is used to order transactions using pools of cryptocurrencies. According to Kraken and Stake’s quarterly report, the value of staked coins reached $42 billion at the end of last year. The report claims that 23% of the market capitalization of all cryptocurrencies is held by blockchains that use staking. Last September, Ethereum switched to proof of stake, and among the top five ether depositors in the world, Kraken is in fourth place.
On the other hand, US stocks also traded lower on Thursday, with the S&P 500 on track for its third decline this week. The S&P500 closed at negative 0.85%, the Nasdaq at -1.05% while the Dow ended with a loss of -0.70% for the day. However, industry experts predict that cryptocurrency prices will continue to fall in the near future. DeFi-specific tokens are predicted to be hit the hardest, as crypto-staking is essentially an important by-product of the larger DeFi ecosystem.
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