Ethereum Crashing Hours After SEC Head Failed To Clarify ETH’s Security Status
Ethereum prices are free-falling less than 24 hours after Gary Gensler, the chairperson of the United States Securities and Exchange Commission (SEC), was put to task on whether ETH, the native cryptocurrency of Ethereum, was a security or a commodity.
SEC Chair Fails To Clarify On ETH’s Status
That Gensler failed to clarify the status of ETH before the House Financial Services Committee on April 18 can be problematic.
Gary Gensler getting grilled on whether he thinks ETH is a security or commodity
Enjoy pic.twitter.com/vrFVn3Ap63
— sassal.eth
(@sassal0x) April 18, 2023
(@sassal0x) Rep. Patrick McHenry, the committee chair, pressed Gensler to state whether ETH was a commodity or a security—meaning the asset must be regulated by the SEC and engaging entities must register to transact.
However, Gensler failed to answer the question saying he didn’t want to “pre-judge”. This statement is despite the SEC taking enforcement actions and serving Wells Notices to several cryptocurrency companies in the past few months.
How the SEC will react to the House Finance Services Committee’s demands remains unclear. In the meantime, without clarity and the SEC demanding platform offering staking services to register, ETH and tokens of proof-of-stake networks would likely remain under pressure.
Ethereum Drops Below $2,000
When writing on April 19, ETH prices have fallen below the psychological $2,000 level, dropping 8% in the last few hours. It comes after ETH prices peaked at around $2,140 on April 14, a few days after the activation of the Shanghai Upgrade on the Ethereum mainnet.
Shanghai was a highly anticipated update that allows validators and stakers to withdraw their coins from the Beacon Chain.
From the Ethereum daily chart, the collapse of prices on April 19 has unwound the gains of April 14. It continues to heap pressure on buyers from last week.
Still, even at spot rates, the uptrend remains firm. ETH is up 40% from mid-March and 72% from December 2022 lows.
Whether this trend will continue and Ethereum buyers flow back depends on the reaction of prices in the next few trading session. The key reaction points going forward are April 2023 highs at $2,140, acting as resistance; and $1,900 on the lower end.
While the SEC and the Commodity Futures Trading Commission (CFTC) have confirmed Bitcoin to be a commodity, the silence from the SEC on ETH’s status could negatively impact ETH and how conservative investors perceive the second-largest cryptocurrency.
Institutional investors often conduct their due diligence so they don’t have exposure to unregistered securities. The SEC is yet to issue clarity on the precise classification of ETH, which is negative for the coin.
