The cryptocurrency market is facing increasing turbulence following an aggressive bullish push in January. ETH, the token powering the largest smart contracts platform, has in 24 hours lost 5% of its value to exchange hands at $1,549 at the time of writing. Bulls should prioritize holding onto $1,550, for Ethereum price to stop losses from stretching further and, instead, push for the resumption of the uptrend to $2,000.

Analysts have been expressing worry about the bear market coming back, or perhaps it never really left. Remember, the total market cap reached the $1.1 trillion mark on February 2 but dropped to slightly above $1 trillion on Friday. If the sell-off continues, the crypto market could find itself in the upper ranges of $900 billion this weekend.

(2) Michaël van de Poppe on Twitter: “Bear market back or are we just having a slight correction?” / Twitter

Ethereum Price Feels The Pressure As US Mulls Ban On Staking

Market watchers are worried about the crypto industry and particularly proof-of-stake protocols like Ethereum. This comes after the United States Securities and Exchange Commission (SEC) went after Kraken exchange for apparently failing to register its “staking as-a-service program.”

Kraken is one of the largest cryptocurrency exchanges in the market, with roughly $745 million in daily trading volume. Staking crypto tokens on Kraken allows investors to earn as much as 21% in annualized interest. Two of Kraken entities resolve to stop the staking services or programs with immediate effect and pay the fine.

Crypto staking is a feature on proof-of-stake (PoS) protocols that allow investors to lock their tokens in a smart contract to secure the network. In return, they are rewarded with an annualized interest in the tokens staked.

How Will A Ban On Staking Affect The Crypto Industry?

The CEO of Coinbase, Brian Armstrong, chimed in on the subject saying it would be a “terrible path” for the industry if staking is burned in the US. Armstrong’s tweet, sent out on February 9, has been viewed by over 5.7 million people. In the post, the CEO lamented the rumor that the SEC is deliberating banning staking programs for the retail consumer.

(2) Brian Armstrong on Twitter: “1/ We’re hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers. I hope that’s not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.” / Twitter

Ethereum is the largest PoS blockchain following the Merge in 2022. The feature “allows users to participate directly in running open crypto networks,” according to Armstrong. Staking is expected to help Ethereum achieve the much-needed scalability and deal with its network congestion woes.

(2) Brian Armstrong on Twitter: “2/ Staking is a really important innovation in crypto. It allows users to participate directly in running open crypto networks. Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints.” / Twitter

Staking is also an alternative to the high energy-consuming proof-of-work (PoW) algorithm that runs Bitcoin (BTC). Bitcoin has been accused of supporting global warming to the extent, Elon Musk, the CEO of Tesla dropped it as an alternative means of payment.

The Coinbase CEO speculated on the SEC considering Ethereum to be a security if rumors of an incoming ban on staking materialize. If that happens the impact would have an immense ripple effect across the industry with ETH staking protocols suffering the most.

Ethereum liquid staking protocols like Lido DAO may have a bombshell coming their way since their business models are centered around providing staking-as-a-service to retail customers. The impact on Ethereum could also be astronomical, with the price likely to drop significantly.

XRP missed out on the 2021 bull market following a case by the SEC against the issuing company, Ripple Labs, for allegedly selling unregistered securities. The lawsuit has dragged on for more than two years with the final ruling expected hopefully before the end of Q2 2023. XRP felt the pressure in the early months of the lawsuit with major crypto exchanges like Coinbase delisting it.

If the SEC sues Ethereum for being a security, the crypto market could witness another rug pull on ETH price with key exchanges likely to remove it as a tradable service. Considering, Ethereum is the second-largest crypto, the impact could leave the crypto market on its knees.

It is also possible that banks may seize the opportunity to register with the SEC to offer crypto staking-as-a-service to their customers. Such a move would negate the core principle of blockchain technology—decentralization.

Banks are centralized entities that offer all services at a fee. However, currently staking on all platforms including decentralized ones like Rocket Pool and Lido, is offered not only as a free service but one that rewards stakers.

Ethereum Price Outlook Ahead of The Weekend

Ethereum price has lost almost 10% of its value from its 2023 high at $1,715 while seeking support at the 200-day Exponential Moving Average (EMA) (in purple), which holds the ground at $1,527. This moving average is Ether’s last line of defense. If broken, the second-largest token may explore areas toward $1,400 with $1,200 not being too far off the way.

ETH/USD daily chart

A sell signal from the Moving Average Convergence Divergence (MACD) adds credence to the pessimistic outlook. Traders planning to short Ethereum price may decide to carry on with their sell orders after the token pierces and holds below $1,527.

Although the next significant support lies at $1,400, both the 50-day EMA (in red) at $1,498 and the 100-day EMA (in blue) at $1,440 are in line to absorb the selling pressure. If they succeed in stopping the plausible dip, Ethereum price may change the course of its trend to the upside.

Extrapolating the analysis on a shorter time frame, like the four-hour chart, clearly shows the path with the least resistance is to the downside. Here, the MACD dons a massive sell signal, with bears holding the reins bolstered by a negative flow in the volume.

In other words, for the first time, the Money Flow Index (MFI) is sweeping toward the oversold region. This indicator underlays the chart like the MACD but tracks the flow of money in and out of ETH markets.

ETH/USD four-hour chart

As observed with the sharp drop from the overbought area to the oversold region, outflow volume outweighs inflow volume. The ascending trend line continues to offer Ethereum price much-needed support. However, if not defended at all costs ETH price may extend the leg to $1,400.

On the upside, bulls must reclaim support above the 200-day EMA (in purple) to protect the uptrend. For Ethereum price to be on the safe side, it must break above the critical resistance at $1,700 to open the door for gains to $2,000.

Buy Ethereum Now

Ethereum Alternatives To Buy Today

Investors may want to consider other best altcoins to buy alongside side ETH. We have selected the best crypto presales for 2023, likely to return above-average gains.

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