Should Ethereum be afraid of the SEC?

On the evening of June 5, cryptocurrency rates reacted with a sharp fall to the suit of the US Securities and Exchange Commission (SEC) against the Binance crypto exchange. On June 6, the market was in a fever after a similar lawsuit by the regulator against the Coinbase exchange. Bitcoin and other digital assets fell in price, but by the morning of June 7, they partially won back the losses, writes RBC Crypto.

Ethereum was no exception and on June 6 updated the minimum since May 25 at around $1802. At 20:40 Moscow time on June 7, the altcoin is trading at $1.84 thousand, its capitalization is $222 billion with a daily trading volume of $10.4 billion.

In lawsuits against Binance and Coinbase, the SEC named several cryptocurrencies as securities. It was these assets that reacted by falling prices more than others, they fell in price by 6-15%.

Despite the fact that the commission named coins that compete with Ethereum (for example, Solana), the largest altcoin itself escaped a similar fate. It was not mentioned as a security in any of the claims.

SEC sample

The SEC sampling algorithm is completely incomprehensible and defies logic, notes Nikita Zuborev, senior analyst at BestChange.ru. Either the initiators of this process have outdated data, from the time of the PoW mechanism in the Ethereum network (until September 2022), or this is a “demonstrative flogging” for trading “tokens that no one needs,” the expert says.

The head of the SEC, Gary Gensler, said in an interview with CNBC that cryptocurrencies, in fact, are not needed at all. “We already have a digital currency. It’s called the US dollar, the euro or the yen,” Gensler said.

According to Zuborev, the very arguments of the American regulator regarding the recognition of projects with PoS and DPoS algorithms (validators, not miners) as securities are “ridiculous”, but at the moment these accusations can “induce panic among investors” and provoke a local price collapse.

“Much more room for growth”

If we consider the long-term prospects for Ethereum, then it has much more growth opportunities than even Bitcoin, Zuborev says. He explained that the growth of BTC is due to its status as the first cryptocurrency, fame and scarcity, which resulted in a leading position in infrastructure development and a share in institutional investment portfolios.

For ETH, the main driver of growth is the field of decentralized finance (DeFi), the expert said. He clarified that it is still at the very beginning of its development and in the future it will be able to greatly push the price of a token that provides infrastructure for DeFi projects.

Utility tokens, including those on the Ethereum blockchain, provide access to certain services or resources, Artem Deev, a leading analyst at AMarkets investment company, explained. Accordingly, the quotes of these currencies will depend on the demand for services in the segments they represent, the analyst believes. He added that in the case of such cryptocurrencies, there can be no direct correlation of their value with the news agenda.

Altcoins in their mass are not particularly known to a wide audience, and are used mainly by crypto market professionals, Deev noted. And even the most famous – Ethereum – does not live up to bitcoin in terms of quotes. Therefore, it will react to news in the same way as Bitcoin, but to a much lesser extent. The drops will not be so noticeable, and the peaks will be smoothed out, the analyst explained.

“Risks persist”

For short planning horizons for Ethereum, everything is very ambiguous, Zuborev believes. He noted that, on the one hand, Ethereum benefited from the fact that it was “forgotten to mention” in lawsuits.

But on the other hand, if he is “remembered” later, he can repeat the fate of the “chosen ones” of the SEC – some investors are withdrawing from these coins, platforms are abandoning assets. Risks remain, the specialist warned.