The cryptocurrency world was rocked by a report from Fox Business regarding Ethereum’s (ETH-USD) classification by the SEC. The news came out due to Consensys’ battle with the SEC and recent court filings. Documents filed on Monday haven’t yet made the rounds in the press, but they hint at the SEC’s long-standing suspicions of Ethereum being a security since 2018. However, new reports suggest that a heavy investigation into ETH being classified as a security began in early 2023.
Investigations into ETH
The intrigue deepens with Gurbir Grewal, head of the SEC’s enforcement division, who signed off on initiating a probe into Ethereum’s dealings. The investigation, dubbed “Ethereum 2.0,” aimed to uncover whether Ethereum’s pivot to a proof-of-stake model in September 2022 might push it into security territory. This move could potentially trigger the Howey Test, a U.S. Supreme Court benchmark for defining securities.
Interestingly, Grewal initiated the investigation on March 28, 2023. Fast-forward to April 18, 2023, and SEC Chairman Gensler is on Capitol Hill before the House Financial Services Committee. When asked about the SEC’s stance on whether Ethereum is a security, he evaded the questions, never giving a yes or no answer despite the SEC’s investigation.
The SEC’s Concerns
However, back in 2018, the SEC’s Bill Hinman cleared Ethereum of security status, causing ETH’s market price to leap. So, why the change? Because the SEC thinks that with ETH being proof-of-stake as opposed to proof-of-work, it may not be as decentralized as it used to be. With Ethereum’s structural shift, the SEC’s whispers suggest a reevaluation.
Amidst this backdrop, MetaMask and Ethereum developer Consensys have been bombarded with subpoenas probing their role in Ethereum’s transformation, the classification of the MetaMask wallet, and their broader financial activities.
The stakes are sky-high. If Ethereum is deemed a security, the ripple (pun not intended) effects could disrupt the entire crypto ecosystem.
Ethereum’s Price Action
From a technical analysis perspective, Ethereum’s performance last week was exceptional. While Bitcoin (BTC-USD) lost -2.83% for the week and extended its consecutive weekly losses to four, ETH ended in the green with a +3.64% gain. However, despite it only being Tuesday, Ethereum is already down -6.49% this week. If it fails to hold near-term support at $3,025, new 30-day lows are highly probable.
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