The crypto sphere is evolving at a rapid and complex pace that often leaves investors confused as to the regulatory rules that apply to these assets. It is in this context that highly respected investment strategist and analyst Lyn Alden sparked a conversation on Twitter by suggesting that Ethereum ($ETH) is likely a security based on the Howey test.
Ethereum and Securities Classification
Lyn Alden argued that Ethereum ($ETH) is likely a security, based on the Howey test. This assertion raised many legal and regulatory questions. According to this test, an entity is considered a security if it meets three criteria: an investment transaction, a joint enterprise and an expectation of profits from the efforts of others. The first criterion is easily verifiable, but the other two are more difficult to assess.
Ms. Alden also highlighted the differences between commodities and securities. Raw materials can be stored and sold freely, without needing the approval of a group of developers. In contrast, securities are often subject to sales restrictions, as they depend on the issuing company to generate profits.
The question of the classification of Ethereum as a security remains debated within the crypto community. Industry leaders have had their say on the matter, but regulators have their say as well. Indeed, Lyn believes that the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) disagree on the classification of Ethereum and that this creates uncertainty as to the state’s final position.
Lyn Alden’s take on bitcoin
Lyn Alden also believes that bitcoin is an attractive investment opportunity, especially over the long term. She recommends that her clients monitor the fundamentals of the Bitcoin network and assess its health, ensuring that it is still performing as expected.
According to her, bitcoin offers a deep zone of value, based on different parameters. These include decentralization, security and resistance to censorship
However, Ms Alden also expressed some concerns about the future of the market in the second half of the year. She said the US Treasury will likely try to take liquidity out of the market. This could lead to negative reversals, consolidations and corrections.
Ultimately, Lyn Alden believes that investors should be aware of the uncertainties surrounding the classification of these assets. However, some companies do not wait and the regulatory vagueness pushes them towards the exit door.
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