Could The Kraken Crack Down Kill Crypto?

If you’re not caught up on the latest FUD, here’s a quick rundown. 🟢

Shortly before Wednesday’s Litepaper was e-mailed out and well after editing, $COIN CEO Brian Armstrong sent out this Tweet:

1/ We're hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers. I hope that's not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.

— Brian Armstrong (@brian_armstrong) February 8, 2023

Initial market responses were ‘meh’, no major selling or FUD in price action. 

That was until yesterday’s cheeky announcement from SEC Chairman Gary ‘Guns Out’ Gensler:

Today @SECGov charged Kraken for the unregistered offer & sale of securities thru its staking-as-a-service program.

Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries must provide the proper disclosures & safeguards required by our laws.

— Gary Gensler (@GaryGensler) February 9, 2023

Long story short, staking through Kraken is no longer allowed for U.S. citizens, and Kraken paid a $30 million fine. 💸

And then crypto markets took a big ol’ FUD dump. 

SEC Commissioner Hester Peirce, affectionately known as ‘Crpyto Mom’, was not a fan and issued a dissent. 

My thoughts on today's Kraken settlement: https://t.co/mijt3MNN4U

— Hester Peirce (@HesterPeirce) February 9, 2023

Coincidentally, BlockFi’s $100 million settlement was just a year ago, in February 2022 – huh.

From a subjective point of view, many in the crypto community are calling for blood.

From an objective point of view – it’s not really that bad. It’s not great, but it’s not the end of the crypto world, either.

The execution, delivery, messaging, and aesthetics could have been waaaaaaay better.

And Gensler does make a good point about the staking rewards and disclosures needing to be made. 

For example: If you stake $ADA.X on Kraken, you get the rewards once a week. However, staking ADA in the native Cardano wallet, Daedalus, you are awarded at the end of every epoch – which is 5 days. 

At once a week, Kraken gives you your ADA reward – 52 times a year. Cardano’s native staking reward interval is every 5 days – 73 awards a year. 

That’s nearly a -28% loss in the frequency of your rewards – where does that go, and who gets it? 🤔

We’ll update you as this topic continues to unfold.

SEC Commissioner Hester “Crypto Mom” Peirce disagreed and dissented from the SEC’s decision to shut down Kraken’s staking program. 

Maybe ‘disagree’ and ‘dissent’ are not good enough words to describe what she wrote in her rebuttal. 

Commissioners use a certain decorum and style in their statements, very governmenty sounding with fancy-schmancy speaking and writing styles. 

Read between the lines, though, and Crypto Mom’s response was the equivalent of a fist to the face. 

Commissioner Peirce suggested that agreeing with the SEC’s decision (or not) probably wouldn’t have mattered: “Whether one agrees with that analysis or not, the more fundamental question is whether SEC registration would have been possible.”

She argued that there are myriad issues with staking, such as whether the whole program should be registered or if only some tokens should be registered. And what disclosures there would be. 

Crypto Mom then winds up a sock full of nickels. She writes, “Instead of taking the path of thinking through staking programs and issuing guidance, we again chose to speak through an enforcement action, purporting to “make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection.” 

And then another sock full of Washington’s comes down, “Most concerning, though, is that our solution to a registration violation is to shut down entirely a program that has served people well.”🥊

And then, the coup de grace, the body slam, the suplex, the curb stomp to end all curb stomps:

A paternalistic and lazy regulator settles on a solution like the one in this settlement: do not initiate a public process to develop a workable registration process that provides valuable information to investors, just shut it down.

You can read the full statement from Commissioner Hester M. Peirce here.

If $BTC.X continues to fall, how low could it go? 

That’s the main question analysts, traders, and investors want to know – especially going into the weekend. 🤔

Let’s take a quick peek at what the analysts are looking at. And it’ll be quick.

$20,370 – that’s the major support zone traders, investors, and analysts are paying attention to. Why? Four reasons:

1. $20,370 is close to the psychological number of $20,000.
2. $20,370 is the 50% Fibonacci retracement from the swing high of $24,262 to the low of the strong bar at $17,102.
3. $20,370 is near the Weekly Kijun-Sen ($20,337).
4. $20,370 is near the Weekly Tenkan-Sen ($20,267).

That’s a big chunk of technical support levels sitting right on top of one another. If it holds as support, analysts believe another leg up is likely.

However, if $20,370 fails to hold as support… well, that could be a warning that the bear market could continue. 🐻

And if you didn’t read or forgot about the Rising Wedge pattern, give it another look from Wednesday’s Litepaper. 

The drop was the most probable direction from a technical analysis perspective, even before the SEC’s Kraken decision.

The table below is the current (February 10, 2023) staking yield rates of the top ten Proof-Of-Stake cryptocurrencies by market cap. 

Staked % is what percent of the total supply of that cryptocurrency is currently used to earn staking rewards – sometimes called ‘Lock-Up.’

The Lock-Up Period is how long crypto must stay staked before you can withdraw it and/or any rewards earned. 

Nominal Yields are the rewards listed, whereas Real Yield is the expected return when factoring in other costs, factors, or changes like inflation rates (not listed). 

It should also be noted that calculations and factors for Real Yields can vary substantially from one week to the next. Additionally, the Nominal Yield may have an expected range but is not guaranteed. For example, Polkadot’s ($DOT.X) Nominal Yield is advertised/listed between 8% to 14%. 

Another factor to consider is that the rewards are not in US Dollars but in token/crypto your stake. Staking Cardano ($ADA.X) rewards you in ADA and so forth. 

This table is updated weekly. 

Source: www.stakingrewards.com

Staking on Chainlink’s blockchain was activated on December 6, 2022 and data is still pending.

$DOT.X and $BNB.X continue to offer the highest Real Yields. 

Polygon’s nominal and adjusted yields experienced a big spike along with a jump in the Staked % – it’s also appreciated more than its peers over the past week.

$ADA.X’s adjusted reward finally flipped into positive territory – barely.