However, The Proof-Of-Stake Consensus Shift Could Result In Any Token In A Proof-Of-Stake Network Is Likely To Be Considered A Security By The U.S. SEC

Ethereum is inching away toward one of the biggest changes in the crypto sector from 2009 to date – transitioning from a proof-of-work consensus mechanism to a proof-of-stake one.

Most of the crypto specialists consider the move towards staking to be an extremely bullish move, with some even considering a scenario where ETH could eventually surpass or “flip” Bitcoin, becoming the industry’s largest digital asset.

Ethereum analyst and researcher Vivek Raman explained that the massive drop in selling pressure could be the key for Ethereum to become the crypto king.

“There are 900 BTC mined per day. At current prices, that’s ~$20mm to miners daily. Let’s assume miners sell 90% to cover costs. That’s ~$18mm in sell pressure *every single day*. Meaning, that without ~$18mm of new daily buy pressure, the BTC price goes down. What if that ~$18mm in daily sell pressure vanished - what would that do to BTC’s price? Wouldn’t it naturally drift up with each marginal new buyer vs being constantly weighed down by daily sell pressure? This is exactly what is going to happen to ETH after the Merge.” Raman explained.

Indeed, Ethereum’s current mining rate sits at 14,250 ETH issued per day. After the Merge, the ETH issuance is likely to become deflationary due to the fee-burning mechanism introduced in August 2021, which burned 13,249 ETH last week.

Another bullish factor is the environmental impact of the Merge, since staking is 99% more energy efficient, meaning Ethereum would no longer see scrutiny from environmentalists, regulators, and policymakers, and make it more attractive to investors and corporations. In contrast, Bitcoin’s algorithm is set to be proof-of-work from day one, which means the blockchain would need larger mining resources as the adoption of BTC continues, while miner competition grows.

Is staking turning Ethereum into unregistered security?

The highly anticipated Ethereum Merge could actually impose regulatory risks, as anti-crypto financial regulators in the United States may decide that Ethereum has now qualified as security.

Adam Levitin, Professor of Law at Georgetown University Law Center, showcased a scenario where Ethereum, as well as the rest of the proof-of-stake pack, could likely be considered a security.

Indeed, the Securities and Exchange Commission chief Gary Gensler is on a mission to enforce regulatory supremacy over the crypto sector. The real problem for cryptos could begin if Gensler succeeds, as it would make crypto projects be treated just like traditional stocks.

Putting proof-of-stake cryptos in the same paragraph as stocks could be done via the Howey Test used in a Supreme Court ruling way back in 1946, used to decide whether an “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”

Ethereum’s staking is actually using the investments of market participants in order to validate transactions and receive a reward, currently around 4.2% APY. However, the “solely from efforts of a third party” part of the equation is still not described fully for Ethereum, since validators are also network participants, which are doing some kind of “work” in order to profit from their operations. Furthermore, Levitin argued that it is difficult to pinpoint “the issuer” in a decentralized system like Ethereum.

Rollercoaster ride for Ethereum’s price

All of the good news regarding the migration to a proof-of-stake algorithm managed to cause big waves of momentum for the second-largest crypto to date, but all of those waves were followed by a near instant cool-down phase. However, Ethereum managed to surpass the $1,000 mark and build strong foundations at around $1,450. The 30% price increase monthly, however, is still insufficient to push Ethereum past the $2,000 mark, which was the cornerstone for the crypto bear market kicking in in late May.

ETH priceSource: CryptoBrowser

Currently, Ethereum is up almost 4% weekly, with a price point of $1,527.77 per ETH.

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