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Why Ethereum price is under more pressure after Gensler comments

Gary Gensler. Source: YouTube/US Securities and Exchange Commission

Ethereum has successfully made its historic transition to proof-of-stake, but the asset’s price action is not responding favorably to the move, in part due to SEC Chair Gensler’s recent comments regarding staked assets as securities.

After years of anticipation, the crypto community has been greeted by an Ethereum merger. The event has been described as the most historic event in the crypto space in recent times.

Nevertheless, Ethereum’s transition to a PoS consensus mechanism means that the network will employ stakers for block validation. The SEC thinks it could turn the property into a security, according to a Bloomberg report.

While failing to mention Ether specifically, Gary Gensler’s recent statements about assets on the POS blockchain fit Ether’s description. According to Gensler’s speech on Thursday, the tokens can be treated as securities, requiring investors to hold them in order to earn a yield. Gensler noted that this method of operation fits the normal business model with assets under securities laws.

Staking a crypto asset involves depositing a portion of one’s assets into a pool as a way to contribute to the security of the network. This method of block validation is a unique feature of a PoS blockchain, as opposed to mining with PoW blockchains.

Despite lower energy demand, assets using PoS may now start to see some heat from the SEC, including Ether. It mentions that previous statements and reports by American officials have treated the two largest digital assets, Bitcoin and Ether, as commodities.

Nevertheless, these reports came when Ether, like Bitcoin, still used mining for block validation. Gensler reiterated that bitcoin is exempt from the SEC’s regulatory policies because it is not a security. Nevertheless, the 64-year-old ex-investment banker chose not to reveal a specific stance on Ether.

Gensler’s comments and recent centralization concerns do not bode well for Ether

Ether’s price did not react as favorably as most proponents expected, in large part due to Gensler’s comments and centralization concerns. The Ethereum merge was triggered on September 15 at 06:42:42 (UTC) at block 15,537,393.

A few hours after the merger, Ether lost support at $1,600. After falling below $1,600, Ether fell below the next major support at $1,500 the following day. Ether’s abnormal performance represents a reversal of the expectations of the majority of the crypto community.

Gensler’s comments have pumped a massive wave of FUD into the Ethereum community, as many proponents fear a similar case to Ripple’s current legal battle with the SEC. While the broader crypto market isn’t doing particularly well, Ether’s 17.5% drop in 7 days is the biggest-losing asset on the top 30 list in less than a week.

Besides Gensler’s criticism, several post-merger metrics have raised fresh concerns about the centralization problem with Ethereum’s PoS model. A few hours after the merger, crypto data provider Sentiment Revealed Some disturbing metrics on its post-merger inflation dashboard.

Per data from the dashboard, 45.15% of nodes running on the Ethereum PoS network appear to be attributed to just two addresses, raising centralization concerns. Some proponents made some unconfirmed claims that these addresses belonged to the Ethereum Foundation and investment bank JPMorgan Chase.

This has contributed to Ether’s recent poor performance. Ether is currently trading at $1,424 at the time of reporting, down 3.13% in the last 24 hours. The asset has seen a free fall after falling below $1,500. The next few days will be crucial for Ether’s price movement in the coming weeks.

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