The crypto markets experienced a correction in the second week of February, with the Nasdaq Crypto Index (NCI) declining 4.2%. Bitcoin (BTC) dropped 3.9, and ether (ETH) fell 5.0%.
The week started with low volatility and limited price action, as the markets appeared to be in a lull. BTC hovered around the $23,000 mark, and ETH around $1,600, as investors awaited a speech from Federal Reserve Chairman Jerome Powell at the Economic Club of Washington. Investors hoped Powell would provide greater clarity on interest rates. However, his speech on Tuesday afternoon was largely in line with what was said during the previous Fed meeting, and both BTC and ETH saw a spike as investors had expected a more hawkish stance.
By Thursday, the crypto markets began to lose momentum, with BTC falling below $22,000 and ETH under $1,600, despite a positive mood in the stock markets due to better-than-expected earnings. The downtrend continued through Friday and Saturday, following news that the Securities and Exchange Commission (SEC) was going after crypto exchange Kraken over its staking service. In the SEC’s own words, “staking is a process in which investors lock up – or “stake” – their crypto tokens with a blockchain validator with the goal of being rewarded with new tokens when their staked crypto tokens become part of the process for validating data for the blockchain. When investors provide tokens to staking-as-a-service providers, they lose control of those tokens and take on risks associated with those platforms, with very little protection.” SEC Chairman Gary Gensler stated that exchanges offering investment contracts in exchange for tokens must provide the proper disclosures and safeguards as required by securities laws. Kraken agreed to pay $30 million and shut down its staking service.
Investors are concerned that this could be the start of a larger US government campaign against major exchanges. As a result, BTC dipped to $21,500, and ETH declined to around $1,500. The markets saw a slight recovery on Sunday, with BTC closing the week near the $22,000 mark.
In the coming week, investors will closely watch for further moves from the SEC regarding crypto exchanges, as well as keep an eye on the January US Consumer Price Index (CPI) release on Tuesday.
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