ALSO: The SEC's move on Kraken's staking program last week shouldn't be seen as an indictment of staking as a whole.
Good morning. Here’s what’s happening:
Prices: Bitcoin might test $20,000 or below, but there's still reason to be bullish about the world's largest digital asset.
Insights: The Securities and Exchange Commission's move against Kraken's staking program isn't an attack on staking as a whole.
Prices
BTC/ETH prices per CoinDesk Indices, as of 7 a.m. ET (11 a.m. UTC)
Bitcoin Is Seeking Support
Happy Monday.
As Asia started the working 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 that bitcoin is now making an “underside test” having already lost the $23K and $22K levels that will determine if it will reclaim the $23K mark or fall to $20K “rather quickly.”
“The market is also reliant on macroeconomic developments, and given how December consumer prices were found to be higher than previously expected, the market may start to consider a bigger rate hike in the next FOMC,” he told CoinDesk in a note.
In looking for support, bitcoin is also digesting regulatory developments too. Last week, Kraken – but not Coinbase – was fined $30 million by the Securities and Exchange Commission (SEC) for its staking 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 Kraken exchange,” DiPasquale said. “That being said, we believe it is better to get regulatory clarity in a slow market, as opposed to stricter developments during a full-fledged bull market.”
Despite all this, DiPasquale said his firm remains bullish on bitcoin – even if it blows through support levels.
“[We] would be looking to accumulate more if prices drop sub-$20,000.”
Biggest Gainers
Asset | Ticker | Returns | DACS Sector |
---|---|---|---|
Solana | SOL | +2.7% | Smart Contract Platform |
Shiba Inu | SHIB | +0.4% | Currency |
Biggest Losers
Asset | Ticker | Returns | DACS Sector |
---|---|---|---|
Loopring | LRC | −5.3% | Smart Contract Platform |
Decentraland | MANA | −5.0% | Entertainment |
Gala | GALA | −4.3% | Entertainment |
Insights
Ether Liquid Staking Platforms Will Benefit as SEC Actions Likely Fail to Knock Out DeFi
Crypto exchange Kraken and the U.S. Securities and Exchange Commission (SEC) have settled over staking.
The regulated Kraken exchange has to pay a $30 million penalty and immediately cease its U.S. service. But, more importantly, staking continues in the United States. Staking refers to locking tokens for a set period to help support the operation of a blockchain. Liquid staking, on the other hand, issues a derivative token that represents the amount of locked tokens to 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 shuttered and the SEC didn’t go after Coinbase or make a move 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 big staking pool. But the SEC seems to be concerned about fund flow: Is ether deposited into Kraken intended for staking really going to staking? Or is it being lent out?
Liquid staking protocols such as Lido and Rocket Pool wouldn’t have that same problem. One could track their ether from their wallet into the pool via a block explorer or other chain monitoring tools.
In the initial hours after the market learned about the SEC’s interest in going after staking, via a Brian Armstrong tweet, liquid staking tokens such as Lido’s LDO surged and surged again when Kraken’s U.S. staking shop closed its doors.
A more reasonable explanation of the surge could come down to the SEC’s current "Yellow Light" towards staking. 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 fund. It’s a ministerial tech service.”
One thing that’s rather telling is that the total value locked of liquid staking protocols like Lido or Rocket Pool didn’t rise in the aftermath.
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 Jan. 1, 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.
Important events
10:50 p.m. HKT/SGT(14:50 UTC) Japan Gross Domestic Product (QoQ)
6:00 a.m. HKT/SGT(22:00 UTC) United Kingdom Claimant Count Change (Jan)
6:00 a.m. HKT/SGT(22:00 UTC) United Kingdom ILO Unemployment Rate (Dec)
All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.
Recommended Content
Editors’ Picks
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days. Investors can expect XRP to kickstart a massive rally.
Optimism price outlook with nearly $90 million worth of OP tokens flooding markets on Friday
Optimism volatility has shrunk in the ours leading to the network’s cliff unlock. It joins the likes of dYdX and Sui, which have similar events on their calendars. As token unlocks are often considered bearish catalysts, investors should brace for a reaction after the event.
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Retail watches from the sidelines with a bias for shorts
Bitcoin could clear $73,777 peak as BTC bulls resurface. Ethereum might fall 10% before next leg up as ETH RSI teases with sell signal. XRP could lose $0.6000 threshold as Ripple bulls fail to show up.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito price action shows a potential cup and handle formation. Based on theoretical measurement rules, a successful breakout could yield a 56% rally to $6.0. A breakdown of the $3.86 support level would create a lower low for JTO and invalidate the bullish thesis.
Bitcoin: BTC may have recovered, but is it out of the woods?
Bitcoin’s (BTC) upward momentum has shown a significant decline for the past two weeks or so. This development led to a bearish signal on the weekly and an uncertain outlook on the monthly.