Ethereum Plunges After SEC Chair Says Crypto Could Be Security

Gary Gensler, chair of SEC,  testifies during a Senate Banking, Housing and Urban Affairs Committee  hearing in Washington,  D.C., on Thursday, September 15, 2022.

Gary Gensler, chair of SEC, testifies during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington, D.C., on Thursday, September 15, 2022.
Photo: Graeme Sloan/Sipa USA (AP)

Ethereum, the second largest cryptocurrency in the world, continued to plunge in price over the weekend following the network’s highly publicized technical change known as ‘the Merge’ last Thursday as well as comments from the head of the Securities and Exchange Commission that ether might need to be a treated as a security. Ethereum is currently trading at roughly $1,290, down over 11% from 24 hours ago, while bitcoin, the most popular crypto in the world, is also down 8% to just $18,420.

Ethereum completed a network upgrade known as ‘the Merge’ last Thursday, moving the cryptocurrency from a proof-of-work system to a proof-of-stake system. Proof-of-work was incredibly energy intensive, requiring so-called “miners” to have their computers play a guessing game to verify transactions. Proof-of-stake allows people who already hold ether to “stake” their cryptocurrency to verify transactions in exchange for longer term interest that’s earned similar to how a savings account might acquire interest.

And therein lies the problem. Moving to a “proof-of-stake” system means that people who invest in ethereum and then “stake” their ether are treating their investment as something closer to a security than a currency—especially since very few people actually use ether to pay for things. And staking has drawn the attention of people like SEC chairman Gary Gensler who made comments after the merge that are making crypto investors nervous.

“From the coin’s perspective…that’s another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others,” Gensler said on Thursday according to a report from the Wall Street Journal.

As the Journal notes, Cardano and Solana are already two popular coins that operate using proof-of-stake. Cardano is down 80% from a year ago while Solana is down 78% from a year earlier.

Bitcoin is currently trading at roughly $18,420, down 8% over the past 24 hours and well below the all-time high of $68,000 on November 9, 2021. The fall and winter of 2021 also happened to be when you started to see all those TV commercials from celebrities like Matt Damon, Larry David, and LeBron James. Funny how they were imploring you to buy at the top, right when smart money was exiting their positions. The Ether Foundation, as just one example, sold a huge amount of ethereum right at the top in November. Either they’re extremely lucky or this entire thing is a Ponzi Scheme.

Click through for a look at how the top cryptocurrencies in the world are faring on Monday morning. Everything is down not just on the day but over the past week too. During the last 24 hours BNB is down about 7%, XRP is down 10.6%, Cardano is down 10.7%, Solana is down 8.6% and Dogecoin is down 8.5%. Rounding out the top ten cryptocurrencies, Polkadot is down 12%, Shiba Inu is down 1.4% and Lido Staked Ether is down 10.7%.

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