Ethereum slumps to weekly low as SEC weighs security status, investors on edge

Category: Blockchain Crypto

The overnight drop in Ethereum’s price came in the wake of disclosures indicating that the U.S. Securities and Exchange Commission (SEC) has been clandestinely weighing the cryptocurrency’s status as a security for more than a year.

At present, Ethereum is hovering around a weekly low of approximately $3,050, marking a 3.9% decrease for the day, according to data sourced from CoinGecko. Over the last 24 hours, trading activity has surged, with transactions totaling roughly $15 billion in volume.

Notably, ETH is currently trading 15% lower than its value a month ago, reflecting the broader market sentiment amid regulatory uncertainty.

The recent decline in Ethereum’s price trajectory coincides with the release of previously concealed segments from a lawsuit initiated by Consensys against the SEC. These disclosed sections shed light on an internal Formal Order issued by the regulatory body in March 2023, which explicitly mentions the investigation of “certain securities, including, but not limited to ETH,” as highlighted in the software firm’s complaint.

This revelation presents a notable contradiction to the SEC’s public stance on Ethereum’s classification. Despite persistent inquiries, SEC Chair Gary Gensler has refrained from definitively articulating the regulator’s position on whether Ethereum qualifies as a security.

This ambiguity persists even as exemplified during a House Financial Services Committee oversight hearing in October 2023, where Gensler remained evasive on the matter.

SEC Considers Ethereum Classification

Should the SEC classify Ethereum as a security, it would appear to contradict Gensler’s earlier assertions. Back in 2018, during his tenure as a lecturer at MIT, Gensler explicitly remarked that Ethereum did not fall under the purview of a security according to the SEC’s perspective.

His statement seemed to align with the sentiments expressed by the SEC’s former Director of Corporate Finance, William Hinman, in a June 2018 address.

In that speech, Hinman characterized Ethereum as sufficiently decentralized, thereby exempting it from being categorized as a security. This historical context underscores the potential divergence between Gensler’s past stance and the current regulatory considerations regarding Ethereum’s status.

However, it’s important to note that these statements were made prior to Ethereum’s significant transition in 2022, known as the “Merge,” during which the blockchain network shifted from the proof-of-work consensus mechanism, akin to Bitcoin’s, to a proof-of-stake model.

In September 2022, coinciding with Ethereum’s Merge, Gensler hinted at the possibility of considering proof-of-stake cryptocurrencies as securities, a sentiment he has consistently echoed thereafter.

Moreover, the SEC’s internal order in March 2023 explicitly mentions an investigation into “Ethereum 2.0,” the commonly used term to denote the network post-Merge. This underscores the regulatory scrutiny surrounding Ethereum’s evolution and the implications it may carry within the securities framework.

The SEC’s stance regarding Ethereum emerges amidst a pivotal juncture, as the regulatory body deliberates on the approval or denial of numerous spot Ethereum ETF applications.

Notably, the SEC has deferred its verdict on applications submitted by prominent asset management firms like Grayscale, BlackRock, and Franklin Templeton, prolonging the anticipation within the financial landscape.

With a significant deadline approaching toward the end of May, sentiments among ETF observers have veered towards pessimism regarding the likelihood of approval. Even renowned investment bank JP Morgan has assigned equal probabilities to the approval and rejection outcomes, underscoring the uncertain terrain surrounding this decision.

Coinbase Moves Large SHIB Tokens

In the last 24 hours, Coinbase moved 100.009 billion SHIB tokens, valued at $2.37 million, to an undisclosed address, part of a trend of significant SHIB transactions. These transfers, often involving major platforms like Uniswap, serve various strategic purposes.

They coincide with increased on-chain activity, reflecting market dynamics and investor behavior. SHIB’s price fluctuates around key levels, attempting to breach $0.00002270 resistance before retreating to $0.00002172 support.

Potential stabilization above this support may lead to an upward move toward $0.00002396 resistance, while a breakdown could see declines toward $0.00001741, near the 200-day EMA. These movements indicate short-term market sentiment and trading dynamics, amid active SHIB trading and investor interest.