The crypto market has experienced relatively sharp declines in the last 24 hours which mark a distinctly negative first week since the beginning of the year. It is possible that these declines should be attributed to the general declines in the market in the last two days, but some also attribute this to what appears to be a regulatory attack, which was reflected in a relatively modest fine – $30 million – but one that could change a central component of proof-of-stake based networks – staking.
30 million dollars, as mentioned, is an insignificant amount in the crypto world, certainly not one that should lead to write-offs of tens of billions of dollars as happened in the last few hours (between 50 and 60 billion dollars since Wednesday in the total market value of the crypto market), so the fine itself is of course influential, but the meaning of the decision, which concerns one of the activities that actually manage to consistently generate profit for users – staking.
A few days ago it was published in Bloomberg that the Kraken company is under investigation by the SEC in relation to the sticking activity it offers to its customers. “The company failed to register an offer and sell the staking program as its service.”
Today we charged Kraken with failing to register the offer and sale of their crypto asset staking-as-a-service program, whereby investors transfer crypto assets to Kraken for staking in exchange for advertised annual investment returns of as much as 21 percent.
— U.S. Securities and Exchange Commission (@SECGov) February 9, 2023
Today it was already known that the company agreed to pay a fine of 30 million dollars, and even announced the cessation of all staking activities to its customers in the United States. In addition, it will cancel all the staking that has already been done for all its customers in the United States, except for the Ether currency, which cannot be canceled until a further upgrade of the Ethereum network. This is a significant damage to the activity of Ethereum and other networks based on proof of stake such as Solna or Cardano and others.
What is staking and why is it so important? This is actually at the heart of the activity of proof-of-stake based blockchain networks – the more energy-efficient method, which the second largest network, the Ethereum network, recently switched to. The users “lock” crypto-currencies in their possession for a certain time as a deposit in order to be able to verify the operations done on the blockchain authority. In exchange for this, they receive a portion of the commissions for performing these actions. If there is no staking, these networks will not be able to operate at all.
The fine follows a tweet yesterday by Coinbase CEO Brian Armstrong that he was “hearing rumors” that the SEC was planning to ban US clients from staking. “I hope that’s not the case because I believe it would be a terrible way for the US dear. Staking is not securities.” Amstrong also wrote: “Staking allows users to participate directly in running open crypto networks. Staking brings many improvements to the (crypto) space, including scalability (the ability to perform many operations in a short time), increased security and lowers the carbon footprint.”
The first signs of the SEC’s intentions came as early as a year ago, when Chairman Gary Gensler hinted that upgrading the Ethereum network might turn its currency, Ether, into a security. That’s because “when you do staking,” he said In a hearing for Saint in September, “the investing public expects profit based on the efforts of others”. This wording is not accidental. This is a clear reference to the definition of a security in American law which is based on 4 parts: a. Investment of money. b. In a joint initiative (ie a company’s activity) C. In anticipation of a profit. D. That it will result from the efforts of other people. If staking activity is indeed defined as a security, every offering and every such activity will require a prospectus, registration and bureaucracy that will complicate the entire procedure, and will distance the users from it, as well as the companies themselves. As mentioned, Kraken , a strictly American company, has already stopped its staking activities in the United States.
Today @SECGov charged Kraken for the unregistered offer & sale of securities thru its staking-as-a-service program.
Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries must provide the proper disclosures & safeguards required by our laws.
— Gary Gensler (@GaryGensler) February 9, 2023
Staking is a growing business and is a key part of decentralized economy (DeFi) applications. The value of all the assets that are currently in the stake is about 42 billion dollars that produce an average yield of 11.6%. Kraken is the fourth largest crypto exchange by trading volume. Its staking service offered a return of up to 24% (depending on the currency on which the staking was performed).
It is very likely that, as in other cases, such a ban in the United States will simply move the industry to other places. Armstrong, whose company he manages is one of the leaders in the United States, fears this: “We have to make sure that we encourage the new technology in the United States, and not stifle it with unclear laws. “Regulation by enforcement does not work. It encourages companies to operate abroad, which is what happened with FTX he said.
Regulation in the United States seems to be on the rise, likely due to the recent crashes, as the regulator feels it must protect investors in the wild west that has emerged in the crypto space. The fine and restrictions on staking join fines imposed last month on the bankrupt Gemini and Genesis exchanges on charges of not registering coins as securities. Investors apparently smell the upcoming restrictions, and are taking another step after the increases since the beginning of the year.
More news from last week
There are those who still make money in crypto, and quite a bit of it. The company that operates the stable currency Tether Earned about 700 million dollars in the last quarter, despite redemptions of 21 billion dollars in currency. The company also announced that the balances backing the currency are just over $67 billion, compared to a $66 billion market value of the coins in circulation.
And there are those who, despite the losses, take advantage of the situation. Mining company CleanSpark A loss of $29 million was reported on revenues of $27.8 million last quarter. Traders apparently liked the report and raised the company’s stock by 1.9%. The reason – the analysts expected a loss of 31.3 million dollars. Despite the terrible performance, the company is far from bankruptcy. The value of its assets is $487 million and its liabilities are only $59.8 million. The company, which therefore enjoys good liquidity, is taking advantage of the crisis in the industry and has purchased thousands of mining machines at a discount as well as two mining sites in Georgia, while its competitors are going bankrupt.
The chain reaction to the FTX crash continues: the ATM company where you can purchase crypto coinsטו Coin Cloud She filled out Chapter 11 forms, that is, bankruptcy. The company was one of the pioneers in the field of ATMs that allow the purchase of digital currencies and was active mainly in the United States and Brazil. According to estimates, it was the second largest supplier in the world and controlled about 13% of the market. According to the forms they filled out, the company’s largest creditor was Genesis, which is itself currently bankrupt, to which the company owes about 100 million dollars.
Resurrection: In the vastness of the virtual world of Bitcoin addresses there are addresses that contain quite a bit of money where no movement has taken place for many years. Often these are wallets whose owners passed away, forgot the code to open the wallet or simply forgot about its existence, and the bitcoin value in them was lost forever.
But sometimes these inscriptions suddenly come to life and it turns out that on the other side is hiding a very, very rich and happy owner. This is what happened with a Bitcoin address that had been inactive since the “Satoshi era”, i.e. almost since the beginning of the currency, and now suddenly came to life. 412 Bitcoin coins that were worth at the time of purchase sometime in 2012, $8, together, were taken out of the wallet at a price of $23,000 per coin. That is, with a total value of close to 10 million dollars. The investor with iron nerves, was not moved by rises of thousands of percent and similar falls, and ended up earning about 120,000,000% on his investment in 11 years. 8 dollars from the most profitable in history.
Was the announcement of the death of the NFT too early?Y? Although sales fell by 90% in January 2023 compared to January 2022, the first week of February showed some recovery, and several tokens even sold for over $1 million, the leader being an NFT called CryptoPunk #5066 which sold for $1.44 million. While it’s still not bubble peak prices, it’s certainly a respectable price for a useless line of code. In the last thirty days the average price of many collections has increased by dozens of percent as well as the sales volume.
What did the major currencies do this week?
The week therefore amounted to significant declines, although not a collapse as happened many times in 2022. Most of the declines occurred towards the end of the week. Below is the performance of the top coins.
Bitcoin (BTC)
BITCOIN
-0.64%
Base:21,976
opening:0
High:22,821
low:21,700
change:—
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. Bitcoin was not directly affected by the staking development as it operates on a proof-of-work system, but still lost 6.7% this week. One coin is now trading for $21,900, after already being worth over $23,000.
Ether (ETH)
ETHEREUM
-2.02%
Base:1,575.8
opening:0
High:1,648.6
low:1,524.8
change:—
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. Ether has recovered a little in the last hour and now concludes a weekly decline of only 5.5%. One mint was traded for $1547.
Binance Coin (BNB). Binance is down 4% and is now trading at $307.
Ripple (XRP). Ripple is down 5.4% since the beginning of the week, and the market cap is once again below $20 billion. One coin is worth $0.39, and the total market cap is $19.6 billion.
Cardano (ADA). Cardano is down 9% and is now trading at $0.36. The total market value is 12.5 billion dollars.
Polygon (MATIC). For the first time in the list of the top 7 – the Polygon currency that ousted Dogecoin, after contrary to the general trend in the market it actually recorded increases of 7% this week. In total, the polygon has increased by 65% since the beginning of the year. One coin is now trading for $1.26 and the total market capitalization is $11 billion.
Dogecoin, which was previously in seventh place, lost 10% this week and Solana, which recovered recently, lost 14% this week. Since the beginning of the year it is still a jump of 108%.