As the United States Securities and Exchange Commission (SEC), slammed a lawsuit on Coinbase, there has been panic in the market. Recent data suggests that Ethereum staking withdrawals from Coinbase have increased following Tuesday’s lawsuit.
Reportedly, the lawsuit has got Coinbase customers and investors getting cold feet over Ethereum staking on the exchange as the withdrawal requests on the platform have increased since the lawsuit. On June 6th, the SEC filed a lawsuit and among the charges, the regulator alleged that Coinbase staking services violate federal securities laws.
According to Dune Analytics, an on-chain analytics firm, about 35,810 cbETH has been redeemed since the SEC’s enforcement action. cbETH is the popular acronym for Coinbase Ethereum staking token. Reportedly, the redemptions are valued at around $65.7 million and far outpace outflows from other staking providers such as Lido.
Moreover, data suggests that June 6 saw the second-largest single-day Coinbase redemption amount in history. The total redemption of cbETH in a single day was recorded at 27,280. Notably, Coinbase has held a significant place in the staking services.
Coinbase is currently the second-largest label entity for ETH liquidity staking.
Colin Wu, industry analyst
However, in his Bloomberg Conference on Wednesday, Brian Armstrong, CEO of Coinbase, affirmed that the platform’s staking services are not going to be affected despite the ongoing lawsuit. Quoting him:
“We’re not going to wind down our staking service. Again, as these court cases play out, it’s really business as usual.”
Reportedly, Coinbase staking accounts for about 3% of overall net revenue, and its commissions are higher than average. The firm takes a whopping 25% on staked Ethereum whereas Lido by comparison takes just a 10% commission.
However, according to Nansen, an analytics firm, Ethereum staking deposits are still outpacing withdrawals despite the statistics that more than 70% of the Ethereum waiting for withdrawal is from Coinbase. Additionally, Coinbase accounts for 19.6% of all Ethereum principal withdrawals as of now.
Nonetheless, that figure is likely to increase as reports state that there is currently 95,478 Ethereum in the withdrawal queue. Furthermore, the dashboard reports a total of 22.6 million Ethereum staked, which is valued at around $41.6 billion.
While the lawsuit has taken the prices of Coinbase stock (COIN) to decline by 10%, it has not significantly impacted Ethereum prices. As of writing, Ethereum has been changing hands at $1,842.65, about a 2.6% decrease over the past 5 days.
Over the months, there have been instances that have fueled the Ethereum staking activities including the Merge. Ethereum’s switch to proof-of-stake (PoS) consensus marked a steadily increasing amount of Ethereum staked across different staking systems. Notably, the current staking withdrawals signify the waning trust of investors in the exchange.
Additionally, it also highlights the fear of uncertainty regarding the SEC’s next act. In a similar instance, the SEC filed charges on Binace, a day before Coinbase. After the lawsuit, the SEC also filed a motion to freeze the assets of Binance.US citing them to be a threat. In a nutshell, the recent activities highlight the panic induced by the SEC which can potentially drive away the US’s chances of becoming a crypto hub.