SEC enforcement against Kraken opens doors for Lido, Frax and Rocket Pool


America Securities and Change Fee is ramping up stress on the crypto sector. On Feb. 9, the SEC reached a $30 million settlement with Kraken over the centralized staking program it offered to its users.

The news of the crackdown sent the price of Bitcoin (BTC) to a three-week low as buyers grew to become frightened of the regulatory enforcement. Ether’s (ETH) worth additionally corrected on the information, cementing the token’s worst-performing day of 2023.

Whereas the general crypto market was down after the SEC announcement, brilliant spots arose, with decentralized liquid staking tokens LDO, RPL and FXS shortly rebounding from their sharp corrections.

In response to Crypto Twitter analyst Korpi, Kraken and Coinbase represent 33% of all staked Ether, and if U.S.-based centralized exchanges are “pressured” to stop providing staking-as-a-service packages, liquid staking derivatives suppliers might soak up that market share.

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Primarily based on current tweets, crypto merchants are nicely conscious of this potential end result, and this could possibly be a part of the explanation for the short-term rebound seen in Lido’s LDO, Rocket Pool’s RPL and Frax’s FXS. Let’s check out some basic information factors that may again their bullish thesis.

Centralized staking could possibly be banned for U.S.-based buyers

The aftermath of Kraken’s capitulation to the SEC might spill over to different centralized exchanges that provide staking as a service. Whereas not all SEC commissioners agreed with the crackdown on Kraken, the settlement puts other companies in the hot seat, resembling Coinbase and its Earn program.

On Feb. 8, Coinbase CEO Brian Armstrong described how disastrous he believes the SEC’s crackdown on staking could be for U.S. buyers.

The SEC’s determination to manage cryptocurrencies by way of enforcement actions relatively than clear laws caught the ire of the crypto community attributable to its ”anti-crypto” actions.

Decentralized staking as a service might clear up securities points

If a wider crackdown on centralized staking providers ensues, that market share of stakers could possibly be absorbed by decentralized suppliers like Lido, Rocket Pool and others. Within the aftermath of the SEC’s determination, Rocket Pool briefly reached $1 billion in total value locked (TVL).

Lido, the biggest liquid staking supplier, has over $8.5 billion in TVL. And whereas the platform didn’t see an preliminary increase in utilization after the SEC’s determination, giant inflows might start as customers search new locations to stake their Ether.

Lido each day energetic customers and TVL. Supply: Token Terminal

The crypto market could also be down for the reason that SEC determination, however RPL and LDO costs are up. Inside 24 hours of the Feb. 9 SEC announcement, RPL’s worth elevated by 14.5% and LDO gained 13.2% earlier than correcting to $2.39.

The rise in costs appears to be from giant whales accumulating main quantities of tokens.

The expansion exhibits that even because the market is down, buyers are betting on elevated platform utilization, which can translate to extra charges for the group.