Bitcoin may test $20,000 as it looks for support
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Good morning. Here’s what happens:
Prices: Bitcoin may test $20,000 or below, but there is still reason to be optimistic about the world’s largest digital asset.
Insight: The Securities and Exchange Commission’s move against Kraken’s betting program is not an attack on the betting as a whole.
Prices:
CoinDesk Market Index (CMI)
1031
−8.7 ▼ 0.8%
Bitcoin (BTC)
$21,740
−118.9 ▼ 0.5%
Ethereum (ETH)
$1512
−25.7 ▼ 1.7%
S&P 500
4,090.46
+9.0 ▲ 0.2%
Gold
$1872
+9.4 ▲ 0.5%
Nikkei 225
27,670.98
+86.6 ▲ 0.3%
BTC/ETH prices per CoinDesk indices, as of 07:00 ET (11:00 UTC)
Bitcoin seeks support
Happy Monday.
As Asia started the work week, the CoinDesk Bitcoin Price Index (XBX) fell to $21,750 and ether is down 1.8% to $1,514.
Joe DiPasquale of BitBull Capital says bitcoin is now making an “underside test” after already losing the $23K and $22K levels that will determine whether it will regain the $23K mark or fall to $20K “pretty quickly.”
“The market is also dependent on macroeconomic developments, and given how December consumer prices were found to be higher than previously expected, the market may begin to consider a larger rate hike at the next FOMC,” he told CoinDesk in a note.
Looking for support, bitcoin is also digesting regulatory developments. Last week, Kraken – but not Coinbase – was fined $30 million by the Securities and Exchange Commission (SEC) for its betting program. The Wall Street Journal also reports that Paxos is next on the SEC’s hit list as it targets the Binance USD stablecoin.
“Regulations are also a concern for the crypto space, especially after the $30 million fine the SEC imposed on the Kraken exchange,” DiPasquale said. “That said, we think it’s better to get regulatory clarity in a sluggish market, as opposed to stricter developments during a full-blown bull market.”
Despite all this, DiPasquale said his firm remains bullish on bitcoin — even as it blows through support levels.
“[We] would be looking to accumulate more if prices fall below $20,000.”
Biggest winners
Biggest losers
Insight
Ether Liquid Staking platforms will benefit as SEC actions are unlikely to kill DeFi
Crypto exchange Kraken and the US Securities and Exchange Commission (SEC) have settled on the stake.
The regulated Kraken exchange must pay a penalty of $30 million and immediately terminate its US service. But more importantly, the effort continues in the United States. Staking refers to locking tokens for a specific period of time to support the operation of a blockchain. Liquid staking, on the other hand, issues a derivative token that represents the amount of locked tokens to the user, allowing them to access decentralized finance (DeFi) services such as lending and borrowing.
The way Kraken offered staking was unique, which is why the exchange’s service was shut down and the SEC didn’t go after Coinbase or crack down on decentralized liquid staking protocols.
Central to the SEC’s statement is a lack of transparency on Kraken’s part. Yes, on-chain data shows that Kraken is one of the largest validators operating a large stake pool. But the SEC seems concerned about fund flow: Is ether deposited in Kraken meant for staking really going to staking? Or is it loaned out?
Liquid staking protocols like Lido and Rocket Pool would not have the same problem. One can trace the ether from the wallet into the pool via a block explorer or other chain monitoring tools.
In the first hours after the market learned of the SEC’s interest in going after staking, via a Brian Armstrong tweet, liquid staking tokens such as Lido’s LDO rose and rose again when Kraken’s US betting shop closed its doors.
A more reasonable explanation for the surge may come down to the SEC’s current “Yellow Light” against striking. Staking as an investment strategy is not allowed, but staking as a technical service is.
As crypto lawyer Gabriel Shapiro tweeted: “Validation-as-a-service is not like an ‘earn’ program, not like taking capital into a business or a fund. It is a ministerial technical service.”
One thing that is quite telling is that the total locked-in value of liquid staking protocols like Lido or Rocket Pool did not rise in the wake.
Since the start of the year, the total value locked in Lido has remained stable: It began the year at 4.9 million ether on January 1st, and is now around 5.19 million ether. Rocket Pool staked ether rose from around 472,000 to 608,000 during the same time period.
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Important events.
22:50 HKT/SGT (14:50 UTC) Japan’s Gross Domestic Product (QoQ)
06:00 HKT/SGT (22:00 UTC) Change of claimant in the UK (January)
06:00 HKT/SGT (22:00 UTC) UK ILO unemployment rate (dec)
CoinDesk TV
In case you missed it, here’s the latest episode of “First Mover” on CoinDesk TV:
Bitcoin falls below $22K after Kraken’s SEC settlement
Bitcoin (BTC) dipped below $22,000 after crypto exchange Kraken geared up to end its crypto-staking-as-a-service platform for US clients and pay $30 million to settle Securities and Exchange Commission (SEC) charges related to the offering of unregistered securities. Ketsal partner Zachary Fallon and DFD Partners president Bilal Little weighed in. Separately, a contentious Uniswap vote highlighted the opacity of decentralized governance. Compound Labs founder Robert Leshner joined the conversation. And Adweek Senior Reporter Patrick Kulp discussed the lack of crypto ads at the Super Bowl this year.
Headings
PayPal Puts Stablecoin Project On Hold, Bloomberg: On Thursday, it was reported that PayPal’s crypto partner Paxos was being investigated by the NYDFS
Regulating crypto by enforcement and stealth will set the US back: Moves to ban staking and stop banks from servicing crypto companies will hurt the industry and send it offshore, CoinDesk says
Tether’s Attempt to Block CoinDesk’s Request for Stablecoin Reserve Records Rejected by New York Court: CoinDesk filed a Freedom of Information Act request for documents about Tether’s reserves in 2021.
Coinbase’s staking service faces questions after Kraken’s SEC settlement: Crypto exchange Kraken agreed Thursday with the SEC to pay a $30 million fine and close its betting platform to U.S. customers to settle allegations regarding the offering of unregistered securities.
Polygon is exploring the use of ZK technology for the main chain, says co-founder Bjelic: In an interview with CoinDesk, Polygon’s Mihailo Bjelic shared the blockchain’s progress in becoming a ZK-secure ecosystem.
