Ethereum’s Merge was the talk of the town, as the protocol successfully transitioned from Proof-of-Work to Proof-of-Stake. However, this shift could bring about additional regulatory scrutiny, as the Securities and Exchange Commission Chair, Gary Gensler, hinted on Thursday. Gensler told reporters after a Senate hearing that the SEC could take a closer look at Ethereum and regulate it as a security.
Speaking to reporters, the SEC also mentioned the Howey test, used by regulators to determine if a particular asset is a security. Gensler stated,“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 did, however, mention that he was not referring to any particular cryptocurrency. He maintained that Proof-of-Stake blockchains that generate new coins for users take on investment contract-like attributes, a move that could bring them under the SEC’s purview.
Strict rules for securities
Staking is utilized by cryptocurrencies to verify transactions on their networks and is used by some of the most prominent players in the market, such as Solana, Cardano, and now, Ethereum. Investors can lock up their assets for a fixed period of time and earn returns. According to the SEC chair, if an intermediary such as a crypto exchange offers staking services to its users, these services are quite similar to lending.
Over the past year, the SEC has repeatedly signaled that firms offering crypto-lending products are required to register with the agency. Back in February, the SEC forced BlockFi to pay a fine of $100 million for failing to register with the agency.
On its part, the crypto industry has stated that it would prefer to be regulated by the CFTC and not the SEC. According to crypto lobbyists, the SEC has a rigorous disclosure regime which they believe is impractical and expensive. Crypto firms and lobbyists have already spent millions lobbying Congress to align with their interests.
“Buy the rumor and sell the news” outcome
The market saw a major decrease in Ethereum prices in the last 48 hours. Some experts fear the merge hype might have a “buy the rumor and sell the news” outcome.
The “buy the rumor and sell the news” event happens in the capital markets. It is when high expectations of events or economic reports cause a hike in asset prices. The hiked prices fall again after the event passes.
Popular cryptocurrency trader and influencer Lark Davis expressed his thought about the hype. In his tweet, he said the merge is a fundamentally bullish event. Davis outlined the features expected of the coming Ethereum POS. However, he also stated that they wouldn’t bring a significant impact immediately.
Another major crypto influencer, Quinten Francios, says that the post-merge Ethereum price will drop as opposed to the Bitcoin price. Therefore, it implies that Bitcoin price will rise while Ethereum price will fall post-merge. He added that the Ethereum price would recover strongly after some time.
Experts have explained the reason Ethereum merge results will not take effect quickly. The transition will change the consensus mechanism of the blockchain to POS but won’t solve some other fundamental problems. For example, it won’t address the issue of low gas fees or expand the network’s capacity. It won’t also improve the transaction speed. A smoothly executed upgrade won’t address the problem of high transaction fees.
But Buterin’s Four-phased theory may address these issues. His data sharding, execution, and scaling solutions solve all the problems.
Ethereum price analysis
Ether price is now consolidating losses above the $1,450 level and below the 100 hourly simple moving average. On the upside, the price is facing resistance near the $1,500 level. The next major resistance is near the $1,550 and $1,560 levels.
Source: ETHUSD on TradingView.com
If Ethereum fails to rise above the $1,500 resistance, it could continue to move down. An initial support on the downside is near the $1,450 zone. The next major support is near $1,420. A downside break below the $1,420 support might another sharp decline.
Hourly MACD –gaining momentum in the bearish zone
Hourly RSI –below the 50 level
Major Support Level – $1,450
Major Resistance Level – $1,550
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