Proof-of-Stake

Ethereum is up 15% versus Bitcoin since Shapella — More ETH price gains ahead?

Ether stakers have withdrawn $1.21 billion worth of ETH from Ethereum staking contracts since the Shapella upgrade.

Ether (ETH) entered a sharp price recovery a week after hitting a six-month low versus Bitcoin (BTC). 

On April 18, the widely-tracked ETH/BTC pair reached 0.0709 BTC, up about 15% from its local bottom of 0.0602 BTC six days ago. Now, the pair eyes a run-up toward 0.075 BTC by June, based on the fractal setup previously discussed here.

ETH/BTC daily price chart. Source: TradingView

Ethereum’s Shapella FOMO

Interestingly, Ether’s local bottom formation versus Bitcoin occurred on the day of Ethereum’s long-awaited Shapella upgrades.

The hard fork enables Ether stakers to withdraw their rewards — around 1.1 billion ETH — from Ethereum’s proof-of-stake smart contract. This update may have boosted ETH’s appeal compared to BTC, beating anticipations that a freshly unlocked Ether supply would increase sell pressure.

Stakers have withdrawn 574,700 ETH — worth about $1.21 billion — since the Shapella upgrades on April 12, according to data fetched by Nansen. Interestingly, Ether’s price in U.S. dollar terms has increased by 14.25% in the same period.

ETH deposits vs. withdrawals. Source: Nansen

It means that many stakers have decided to hold onto their Ether rewards. On the other hand, Bitcoin has failed to log a decisive breakout above its technical resistance of $30,000, possibly making ETH a more attractive short-term bet for traders.

Weak institutional inflows versus Bitcoin

Institutional investors have shown more interest in Bitcoin than Ether in the past week, according to CoinShares’ weekly report.

For instance, Bitcoin-based investment vehicles witnessed $103.8 million in inflows in the week ending April 14. In comparison, Ethereum funds attracted $300,000, showing that mainstream investors may have followed the “sell the news” strategy after the Shapella upgrades.

Net flows into crypto funds. Source: CoinShares

Ether’s price, meanwhile, is also at risk of a possible bearish reversal move due to its overbought daily relative strength index.

Related: Shapella could bring institutional investors to Ethereum despite risks

If ETH price retreats from its current resistance level of around $2,140, its immediate downside target appears at around $1,984, which acted as resistance in May 2022 and August 2022.

ETH/USD daily price chart. Source: TradingView

An extended sell-off could push Ether price down to its 50-day exponential moving average (50-day EMA; the red wave) near $1,800, down about 15% from its current price levels.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Less than 1% of staked ETH estimated to be sold after Shapella: Finance Redefined

The top 100 DeFi tokens surged along with the broader crypto market as the total value locked peaked at a new yearly high of over $54 billion.

Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you significant developments over the last week.

The past week in DeFi was filled with anticipation leading up to the Shapella upgrade on the Ethereum mainnet. The hard fork was successfully completed on April 12, allowing validators to withdraw their staked Ether (ETH) after three years. However, only 253 validators have signed up to fully exit their staked Ether position, with analytics firm Glassnode predicting that less than 1% of the staked ETH will be withdrawn.

Amid all the rejoicing post-Shapella upgrade, an Ethereum researcher has revealed that staking Ether could become a privacy concern, as he had “internally” discovered that staking Ether shows a user’s IP address information.

A hacker minted 1 quadrillion Yearn Tether (yUSDT) after exploiting an old Yearn.finance contract, and then swapped the yUSDT to other stablecoins, allowing them to take hold of $11.6 million worth of stablecoins.

DeFi-based financial inclusion serves to increase liquidity and earning opportunities for African micro-entrepreneurs through Fonbnk’s partnership with Tanda.

The top 100 DeFi tokens had another bullish week, thanks to a late surge in the crypto market after Ethereum’s much-awaited upgrade. Most DeFi tokens traded in green along with the rest of the market.

Less than 1% of staked ETH estimated to be sold after Shanghai upgrade: Glassnode

Just 170,000 Ether of the 18.1 million ETH staked on the Beacon Chain will be unlocked within the first week of the Shanghai hard fork being executed on Ethereum, Glassnode has predicted.

The figure comprises 100,000 Ether ($190 million) worth of staking rewards and 70,000 ETH worth of staked Ether ($133 million), the on-chain intelligence platform predicted in its April 11 report.

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Ethereum researcher says staking reveals IP address, sparking privacy concerns

A researcher at the Ethereum Foundation (EF) showed that the IP addresses of ETH stakers are monitored as part of a broader set of metadata, causing the cryptocurrency community to flag Ethereum for privacy concerns.

In an April 12 interview on the crypto podcast Bankless, EF researcher Justin Drake revealed that he learned this information “internally.” The metadata Drake referred to tracks a wide range of information.

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Web3 economy to gain more traction in Africa through DeFi-based financial inclusion

Web3 in Africa began with cryptocurrency, with blockchain technology bringing a lot of transformation regarding transparency and people’s control over their finances. The Web3 economy in Africa continues gaining traction with decentralized finance-based financial inclusion.

Fonbnk, the Web3 on-ramp that allows Africans to obtain cryptocurrency assets by exchanging their airtime credits, has partnered with Tanda, a merchant network platform in East Africa, to launch an airtime trading marketplace across Tanda’s network of agents.

Continue reading

Hacker mints 1 quadrillion yUSDT after exploiting old Yearn.finance contract

Blockchain security firm PeckShield recently detected a hack that allowed the attacker to mint over 1 quadrillion yUSDT from $10,000 in the latest DeFi exploit.

According to the security firm, the hacker then swapped the yUSDT to other stablecoins, allowing them to take hold of $11.6 million worth of the tokens. This includes 61,000 Pax Dollar (USDP), 1.5 million TrueUSD (TUSD), 1.79 million Binance USD (BUSD), 1.2 million Tether (USDT), 2.58 million USD Coin (USDC) and 3 million Dai (DAI).

Continue reading

DeFi market overview

Analytical data reveals DeFi’s total market value crossed $54 billion this past week. Data from Cointelegraph Markets Pro and TradingView shows that DeFi’s top 100 tokens by market capitalization had a bullish week, with most of the tokens trading in green, barring a few.

Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education in this dynamically advancing space.

Ethereum on-chain data forecasts the withdrawal of 1.4M ETH over the next few days

ETH price rallied as deposits briefly surged after the Shapella upgrade, but on-chain data suggests that 1.4 million ETH will be withdrawn in the short term.

Ethereum’s long-anticipated Shanghai and Capella upgrades were activated on April 12, and the total withdrawals in the first 40 hours following stood at 142,425 Ether (ETH), per Nansen data. This falls in line with previous estimates. 

For a brief moment on April 12, when Shapella was activated, the deposits to ETH staking contracts outpaced withdrawals. However, deposits have slowed down come April 13, while withdrawals are going strong.

ETH moved for withdrawals

Validators are required to update their staking software clients with withdrawal credentials changed to 0x01 from 0x00 and point to a valid Ethereum address. Once validators do that, partial withdrawals —i.e., withdrawals of rewards above 32 ETH — will be processed automatically.

At the time of writing, 70.1% of validators have changed to 0x01, with 407,851.20, worth over $850 million, set for withdrawal.

Additionally, 875,325 ETH (worth $1.85 billion) is waiting for full exit. Adding to the amount already processed in the first 40 hours, over 1.42 million ETH will be withdrawn from the staking contract.

ETH withdrawals will be rate limited to 1,800 validators per day, translating to a daily withdrawal of 57,600 ETH per day based on 32 ETH per validator. With 875,325 ETH waiting for full exit, it corresponds to potential daily selling pressure of between $120 million.

Validators moving to withdraw their ETH. Source: Nansen

In the first three days, when partial withdrawals will be processed as well, the total daily withdrawals will be 136,000 ETH and 173,000 ETH per day.

However, the above statistics must be taken with a grain of salt because 62.8% are forced withdrawals from the U.S.-based crypto exchange Kraken in response to a $30 million settlement with the U.S. Securities Exchange Commission to discontinue staking services.

There is a chance that a significant portion of Kraken withdrawals will move to decentralized liquid staking platforms like Lido, Frax and Rocket Pool instead of being sold on the market.

Breakdown of ETH waiting for withdrawals by entities. Source: Nansen

Interestingly, Lido accounts for 56.07% of the withdrawals processed so far, which is slightly concerning, as previous estimates suggested that withdrawals from liquid staking derivative platforms like Lido would be minimal.

Currently, 9.6 million staked ETH is in profit, which will remain most vulnerable to a sell-off. It also remains to be seen if more illiquid stakers will move to withdraw their ETH, as they represent over 34% of the 17.4 million ETH deposited in total.

Ether price analysis

Technically, the ETH/USD pair looks bullish, having broken above the $2,000 resistance level. Buyers will look to target the support and resistance levels around $2,300 and the May 2022 breakdown levels at around $2,900. Short-term support to the downside lies at around $1,725.

ETH/USD daily price chart. Source: TradingView

Related: Shapella could bring institutional investors to Ethereum despite risks

The funding rates for ETH perpetual contracts are in neutral territory, deposit the price surge, per Coinglass data. Usually, neutral positioning of the perpetual market after a major price surge means that traders are not yet excited with the present rally, which is represented by a spike in positive funding rates. It also allows more upside room for prices.

ETH perpetual futures funding rate. Source: Coinglass

However, given that there could be some spot selling pressure from the ETH withdrawals, it will likely restrict the uptrend in the market.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Ether staking withdrawals: Crypto exchanges set calendar for unstaking

A majority of the validators are withdrawing their staking rewards rather than the whole 32 staked ETH.

Ethereum mainnet successfully completed the Shapella upgrade on April 12, meaning that Ethereum validators can finally withdraw their staked Ether on the Beacon Chain.

A total of 126,955.07 ETH were withdrawn by validators at the time of writing. Presently, 248,043 out of the 559,549 active validators, or about 44% of them, have the ability to request a partial or full withdrawal. The majority of withdrawals currently vary between 2.8 to 3.2 ETH (ETH), indicating the majority of the validators are only withdrawing their staking rewards.

Total staked ETH withdrawal. Source: beaconcha.in

The average price of staked ETH is $3,149 and it could be another reason why validators are not withdrawing the whole amount. The ETH price is currently trading just under $2,000 with the price acting as key resistance.

Staked ETH data and exchange holdings. Source: Nansen

Major crypto exchanges have announced their support for the ETH unstaking with several exchanges already processing withdrawal requests. Coinbase, the world’s first publicly listed crypto exchange announced that ETH unstaking is now live on their platform.

BitGo chief operating officer Chen Fang took to Twitter to announce that the custodian has upgraded to Shapella successfully, and ETH withdrawals are now live on the platform.

Kraken, on the other hand, started withdrawing validators for their United States customers on April 11 and began processing withdrawals of ETH after the completion of the Shapella upgrade. The early withdrawal of validators by the exchange is caused by the U.S. Securities and Exchange Commission action brought against Kraken’s Ethereum staking product back in February.

Related: Upcoming Shapella upgrade fuels liquid staking growth — AMA with Swell

Kraken Australia Managing Director Jonathon Miller told Cointelegraph that even though such a high quantity of ETH unstaking might cause some price volatility it will bring users to the ecosystem in the long run. He explained:

“Whilst this unlocking event may create conditions for an exodus from the staking protocol, the ability to freely stake and unstake (in accordance with bonding periods specified by the protocol) could equally attract many ETH holders. The move to unstaking could see a massive movement of assets into Ethereum staking pools.”

Binance, the leading crypto exchange by trading volume, said it would support the Shappela upgrade and start the withdrawal processing requests starting from April 19. The crypto exchange also added that the withdrawal request could take up to 15 days to process due to processing limitations.

Bitfinex, one of the leading crypto exchanges, congratulated the Ethereum community on the successful upgrade and said the ETH withdrawal details will be shared soon.

Magazine: 2023 is a make-or-break year for blockchain gaming: Play-to-own

Can Ethereum crack $2K? ETH price inches closer despite new unlocked supply

Ethereum staking withdrawals are gathering momentum but have not been able to cause a major sell-off as many anticipated post-Shapella upgrades.

The price of Ethereum’s Ether (ETH) token edged toward $2,000 a day after the launch of the network’s long-anticipated Shapella upgrade.

Ethereum ducks sell-the-news fears

On April 13, Ether’s price gained roughly 4% to reach an intraday high of $1,996 on Coinbase, ignoring the potential sell-off pressure the Shapella upgrade could potentially bring to the market.

ETH/USD daily price chart. Source: TradingView

To recap: The Shanghai hard fork, also known as “Shapella,” enables users to withdraw their ETH from Ethereum’s proof-of-stake smart contract.

As of 9:00 am UTC on April 13, over 98,000 ETH worth around $194.8 million has left Ethereum’s voting balance reserves since the Shanghai launch a day ago, according to Nansen. In other words, nearly $200 million in potential selling pressure has entered the market.

ETH deposits vs. withdrawals. Source: Nansen

But Ether’s price rise since Shanghai suggests that the market has had no problem absorbing any selling pressure arising from this event so far. It’s also possible that most users have decided to hold onto their ETH staking rewards rather than sell them in anticipation of further gains.

About 15% of Ethereum’s total supply in circulation, nearly 120.4 million ETH, is currently staked.

Interestingly, more than 70% of the ETH staked is still underwater compared to current price levels, according to data gathered by Dune Analytics. This reduces the possibility of a sell-off in the near term from Shanghai’s staking withdrawals.

Ethereum price risks 10% correction

The ongoing run-up in the Ethereum market has left ETH/USD slightly overbought, raising the likelihood of a short-term price correction this month.

Related: When levees break, liquidity flows — Analyzing Ethereum Shapella and liquidity staking derivatives

Notably, ETH’s daily relative strength index (RSI) is merely two points below its overbought threshold of 70. In addition, ETH/USD tested a critical resistance level near $1,990, which preceded price pullbacks in May and August 2022.

ETH/USD daily price chart. Source: TradingView

A repeat of this scenario likely means a correction toward its 50-day exponential moving average (50-day EMA; the red wave) near $1,750 in April, down about 10% from the current price levels. This ETH price level is also close to the historical support/resistance line.

Conversely, a decisive breakout above $2,000 — a psychological resistance level — could have Ether price start its potential climb toward $3,000.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

When levees break, liquidity flows — Analyzing Ethereum Shapella and liquidity staking derivatives

Volumes from the top five Ethereum staking platforms suggest holders are hedging against the unknown until after ETH withdrawals are enabled.

The Ethereum network’s planned Shanghai hard fork is nearly here. Planned for April 12, this is the first major upgrade since the Merge in September 2022. The “Shapella” upgrade (a combination of the two major proposals, Shanghai and Capella), includes EIP-4895, which enables validators to withdraw staked ETH from the Beacon Chain (Consensus layer) to the EVM (execution layer). The execution layer is the fun and friendly Ethereum thausers have come to know and love. 

Why is this a big deal? With just over 18 million ETH currently staked (valued at just over $33 billion at the time of writing), some of which has been locked up for years, the possibility of these tokens flooding an already teetering market is enough to get some holders ready to sell the news once withdrawals are enabled.

For holders who are both long and short ETH post-withdrawals, it’s likely to be a significant event, and on-chain activity suggests many feel the same: activity around liquid staking derivatives (LSDs) can be a useful gauge for what the market might do post-unlock.

Liquid Staking Derivatives could exert influence over Beacon Chain unlocks

What are liquid staking derivatives? They are a relatively new financial instrument born of DeFi that functions like bearer instruments for staked ETH. Similar to how borrowing and lending protocols give users a share token to represent locked collateral (think Aave’s a-tokens), staking ETH generates a wrapped asset used to claim the equivalent amount of Ethereum from the staking platform. When a staker deposits ETH with major platforms like Lido, Rocket Pool, Frax, Stakewise and now Coinbase, they receive a platform-specific flavor of LSD. Because staked tokens are illiquid, these wrapped assets allow stakers to continue earning rewards while securing the network without completely giving up the opportunity to participate in other activities within DeFi.

Liquid staking derivatives aim to solve these problems by allowing staked assets to be traded on secondary markets. This means that stakers could access the value of their staked ETH before the Shanghai upgrade enables withdrawals or, in the future, while maintaining their staked position. For example, a staker could use their wrapped ETH as collateral on another platform, or cover an unexpected expense by selling their LSD on a secondary market.

Rocket Pool, Lido, Coinbase and Frax

Though the markets have seen what seems to be an increasing string of green days, with Ethereum rapidly catching up to Bitcoin’s year-to-date performance, ETH’s gains are set against a backdrop of volatility among LSDs and staking tokens.

Lido’s LDO hasn’t recaptured its high from early March and has maintained a resistance at $2.75. The largest staking protocol by nearly an order of magnitude, Lido currently offers some of the highest staking rewards among major providers, with an average APY around 10%. The high rewards are no surprise: Lido took in nearly 50 million ETH in fees and 5 million in revenue in March, with April on track to meet or exceed those numbers.

LDO versus ETH price. Source: TradingView

Rocket Pool’s RPL fared much better, with a 25% increase over the last thirty days. The wrapped asset issued by the number three staking provider by TVL, rETH, has historically traded at a premium to ETH and other LSDs, likely a result of the provider’s reputation as the most decentralized staking solution available to holders today, making rETH a desirable LSD to hold.

Over the last thirty days, Rocket Pool has seen over $46 million in inflows, with many likely hoping to cash in on rETH’s premium when withdrawals are enabled. Rocket Pool’s average APY according to DeFiLlama is around 3.65%, which isn’t as high as other providers, but with over 1,800 active Rocket Pool nodes, the decentralized nature of the protocol is attractive. Addresses holding RPL have been steadily increasing as well.

Conversely, LSDs from the two top staking providers, Lido and Coinbase, both trade at a discount to spot ETH. Together representing nearly 90% of all staked ETH, it’s unsurprising that Lido and Coinbase have both come under scrutiny as centralizing entities given their concentration of staked ETH.

Ethereum LSD providers share of staked ETH. Source: DeFiLlama

Despite RPL’s impressive performance and StakeWise’s native token SWISE’s 15% gain, Frax seems to have come out as the winner.

Frax Ether has seen the most significant jump in total value locked over the last 30 days compared to the other top 10 staking providers at 14% growth for a $244 million valuation. Despite the increase in TVL, Frax totaled only $3.1 million in inflow over thirty days, putting the protocol just above StakeWise’s $2.6 million.

Total value locked in Frax. Source: DeFiLlama

Liquid staking derivatives like the wrapped Ether offered by staking providers is an important part of the Ethereum ecosystem much like plasma is an essential part of human blood. DeFi, NFT trading and GameFi are all interlinked, sometimes more subtly than others.

LSDs perform an important function of maintaining liquidity within the Ethereum ecosystem. Currently, over 15% of all Ether that exists is staked with a Beacon Chain validator (meaning this doesn’t include any ETH being used as collateral on borrowing/lending platforms).

Considering that a non-trivial amount of that ETH has been locked for years, through one of the toughest bear markets on top of that, indefinitely freezing this much capital (worth over $33 billion at the time of writing) would have a lasting and noticeable effect on the entire ecosystem.

Over the last 30 days though, trying to hedge against the chaos post-Shapella by holding unstaked ETH didn’t perform much better than holding an LSD: ETH is up 31% compared to stETH’s 30%, rETH’s 30%, while Coinbase’s cbETH is up 32% and Frax’s LSD is up 34%.

Overall, liquid staking derivatives are an important development in the staking ecosystem, as they help to address some of the challenges associated with staking, while also expanding the pool of potential participants in the ecosystem.

Related: Ethereum traders show uncertainty ahead of April 12’s Shapella hard fork: Report

Withdrawals being enabled for staked Ethereum on the Beacon Chain means that proof-of-stake Ethereum has reached a point of sufficient stability and security, and the stakers who participated in securing the network will be able to retrieve their staked funds.

Regardless of the immediate impact of enabled withdrawals, proof-of-stake Ethereum’s continued success relies on incentivizing ETH holders to validate the network, and liquid staking derivatives have proven to be an effective mechanism to do so.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Post-Merge Ethereum: Grayscale extends review of ETHPoW decision

Grayscale will take 180 days at max to decide whether, when and in what manner to sell ETHPoW on behalf of the record date shareholders.

Cryptocurrency investment firm Grayscale Investments is taking more time to decide whether it should acquire and sell post-Merge forked Ethereum tokens.

Grayscale announced on March 16 that the company intends to extend the review period for evaluating the market environment to determine whether it can acquire EthereumPoW (ETHW) tokens — the forked asset that emerged after Ethereum’s Merge in September 2022.

During the review period, the firm also aims to decide whether, when and in what manner Grayscale may sell ETHW on behalf of the record date shareholders. “Such review period is not currently expected to exceed 180 days from the date hereof,” Grayscale noted in the announcement.

Grayscale reasoned the extension of the review period to the ongoing uncertainty regarding the support of ETHW tokens by digital asset custodians and trading venues. “If digital asset custodians do support the ETHPoW tokens and/or trading markets do develop, it is expected that the ETHPoW token’s value will fluctuate widely for some time,” Grayscale said, adding:

“It is not possible to predict whether Grayscale, as agent, will be able to acquire the ETHPoW tokens or the value, if any, that Grayscale, as agent, will be able to realize from sales of the ETHPoW tokens.”

Ethereum, currently the second-largest blockchain network by market value after Bitcoin, completed the Merge, a major consensus upgrade in September 2022. The upgrade moved the Ethereum network from proof-of-work (PoW) to proof-of-stake (PoS) consensus algorithm. As some people in the Ethereum community were willing to keep using the mining-based PoW Ethereum model, Ethereum has forked into two different blockchains, the main PoS-based Ethereum and EthereumPoW.

The emergence of ETHW has brought a significant challenge for crypto investment firms offering exposure to Ethereum because some investors might want to have exposure to ETHW. Some companies, such as the European exchange-traded product (ETP) issuer ETC Group, decided to launch a new ETP providing exclusive exposure to ETHW.

Related: Coinbase expects high demand for ETH unstaking with Shanghai upgrade

“The new ETP seems better because we just don’t know what will happen whether ETHW will succeed or not,” ETC Group founder Bradley Duke told Cointelegraph in September 2022.

In September, Grayscale announced that its two Ethereum-related products, the Grayscale Ethereum Trust and the Grayscale Digital Large Cap Fund, declared a distribution of rights to ETHW. Each product received the tokens as a result of a fork by late September.

Ethereum core developers set April 12 for Shanghai hard fork

The upgrade will enable staked ETH withdrawals on the Beacon Chain, completing Ethereum’s transition to a PoS consensus.

The target date for the highly anticipated Shanghai hard fork on Ethereum has now been set: April 12. Ethereum core developers approved the target deadline during the All Core Developers Execution Layer #157 call on March 16.

The Shanghai mainnet upgrade features five Ethereum Improvement Proposals, including EIP-4985, which will enable staked Ether (ETH) withdrawals on the Beacon Chain, completing Ethereum’s transition from proof-of-work to a proof-of-stake (PoS) consensus.

The target date — April 12 at 10:27:35 pm UTC, epoch 620,9536 — will now be confirmed by developers on GitHub. The fork was initially forecasted for March, but developers later pushed it back to early April.

Validators will receive rewards payments automatically at periodic intervals in withdrawal addresses. Additionally, stakers can exit positions entirely, reclaiming their full balance.

According to Etherscan, the Ethereum PoS smart contract has attracted over 17.6 million ETH, worth nearly $29.4 billion at publication time. Analysts predict that the upgrade could trigger a sell-off in the short term, as Cointelegraph reported.

Overview of Ethereum PoS smart contract. Source: Etherscan

The transition to PoS officially started on Sept. 15, 2022 with the Merge, a significant milestone for Ethereum that replaced miners with validators and introduced ETH staking as a key component of the network. Ethereum’s roadmap has several updates coming after Shanghai, including the “Surge,” “Verge,” “Purge” and “Splurge.” 

The switch to a PoS consensus could have regulatory implications for ETH and the crypto space. In September 2022, United States Securities and Exchange Commission Chair Gary Gensler suggested that the blockchain’s transition might have brought ETH under the regulators’ radar.

After a recent crackdown on crypto firms providing staking services in the U.S., Gensler again suggested on March 15 that proof-of-stake coins might be securities: 

“Whatever they’re promoting and putting into a protocol, and locking up their tokens in a protocol, a protocol that’s often a small group of entrepreneurs and developers are developing, I would just suggest that each of these token operators […] seek to come into compliance, and the same with the intermediaries.”

Gensler suggests staking token operators should ‘seek to come into compliance’

The SEC head was speaking impromptu to reporters after a commission meeting when he was asked about a statement made by the CFTC chair.

United States Securities and Exchange Commission Chair Gary Gensler has again suggested that proof-of-stake coins may be securities. He expressed his view on March 15 after a commission meeting on cybersecurity issues.

Gensler was asked by reporters about his reaction to statements made by Commodity Futures Trading Commission Chair Rostin Behnam at a Senate Agricultural Committee meeting last week that he felt stablecoin and Ether (ETH) were “going to be commodities.” Gensler replied, as reported in The Block:

“The investing public is investing anticipating a return, anticipating something on these tokens, whether they’re proof-of-stake tokens, where they’re also looking to get returns on those proof-of-stake tokens and getting 2%, 4%, 18% returns.”

“Whatever they’re promoting and putting into a protocol, and locking up their tokens in a protocol, a protocol that’s often a small group of entrepreneurs and developers are developing, I would just suggest that each of these token operators […] seek to come into compliance, and the same with the intermediaries,” he continued.

Gensler has voiced his opinion on proof-of-stake coins before. In September, after the Ethereum Merge, Gensler said proof-of-stake coin holders were members of “the investing public anticipating profits based on the efforts of others.”

Later that month, Gensler told a Senate Banking Committee that staking is “another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others.”

Related: Proof of Stake Alliance publishes white papers on legal aspects of liquidity staking

The Howey test, which dates to 1946, is used in U.S. law to identify securities.

Earlier this year, the SEC also forced cryptocurrency exchange Kraken to discontinue its staking service and pay a $30 million settlement on Feb. 9, setting off concerns that the agency was preparing a new round of enforcement actions in the cryptocurrency industry. Gensler said at the time, “If they want to offer staking, we’re neutral. Come in and register, because investors need that disclosure.”

Ethereum eyes 25% correction in March, but ETH price bulls have a silver lining

The Ethereum market has grown cautious around the long-awaited Shanghai upgrade, which will unlock 17.4 million ETH into circulation.

The price of Ethereum’s native token, Ether (ETH), shows a growing conflict among traders about the market direction for March. This uncertainty has resulted in ETH price consolidating inside a narrow sideways range between $1,600 and $1,700 since Feb. 15.

25% ETH price correction on the table in March

The uncertainty stems from Ethereum’s long-awaited Shanghai upgrade going live sometime in March.

Several analysts predict the upgrade, which will enable stakers to withdraw their vested tokens from Ethereum’s proof-of-stake (PoS) smart contract, will trigger a short-term sell-off event. 

The Ethereum PoS smart contract has attracted more than 17.4 million ETH (~$28.35 billion at the current exchange rate) since its introduction in December 2020, per Etherscan.

In addition, Ether is finding it difficult to break above the technical resistance range. The Ethereum token has attempted to flip the $1,650–1,700 area to support multiple times since August 2022, as shown by the red bar in the chart below.

ETH/USD daily price chart. Source: TradingView

Interestingly, each failed breakout attempt has resulted in a strong pullback toward a common support line — a multimonth ascending trendline (black).

Therefore, if history is any indication, ETH’s next correction could potentially land its price near $1,250, down 25% from the current levels. Conversely, a break above $1,650–1,700 positions ETH for the $1,925–2,000 range (purple) as its next upside target.

Future ETH selloffs will be limited — data trackers

From an on-chain perspective, an extended Ether price crash appears less likely. 

Notably, there’s been a massive drop in ETH supplies on exchanges since September 2022 — falling from around 30% to 11%. Theoretically, this reduces the immediate sell pressure as capital moves to the sidelines.

“The trend in crypto, particularly since September, has been quickly moving self-custody,” Santiment noted, adding:

“This trend picked up after the FTX collapse. Regardless, with both BTC and ETH around 5-year low exchange supplies, future sell-offs will be limited.“

In addition, data analytics firm CryptoQuant has reached a similar conclusion about potential Ether selloffs in the future, primarily in the wake of the Shanghai hard fork.

Related: 3 tips for trading Ethereum this year

CryptoQuant notes that 60% of the staked ETH supply — about 10.3 million ETH — is currently at a loss. Meanwhile, Lido DAO, the largest Ethereum staking provider, holds 30% of all staked ETH at an average loss of $1,000, or 24%.

“Typically, selling pressure arises when participants have extreme profits, which is not the case for staked ETH currently,“ CryptoQuant wrote:

“Additionally, the most profitable staked ETH was staked less than a year ago and has not seen significant profit-taking events in the past.“

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.