The price of Ethereum is currently lower, and an increasing number of potential obstacles may continue to put downward pressure on ETH pricing for the foreseeable future.
The price of ether is falling on December 16, 2018, and the pre-FOMC surge that took it to $1,350 was completely wiped out. This occurred when the chair of the Federal Reserve, Jerome Powell, made hawkish words in response to a 0.50% increase in interest rates.
The sell-off of ether came after a general market slump, which resulted in a decrease of Ethereum network fees of 39.90% over the course of the previous 30 days.
The total value that was locked up in smart contracts that were based on Ethereum dropped by 4.49% in just twenty-four hours due to decentralised finance.
As a result of the incident involving the FTX exchange, regulatory agencies are making efforts to expedite the development of new regulations for the cryptocurrency industry.
On-chain data provides a bleak picture of the short-term price prospects for Ethereum, despite the fact that some analysts believe Ethereum still holds many positive catalysts that support investing in the asset.
Here are three explanations for why the price of Ether has dropped today.
As total revenue decreases, Ethereum begins to exhibit inflationary behaviour.
The price of ether dropped when the daily transaction fees on the Ethereum network plunged to $2.9 million, down from $12.8 million on June 13, before the FTX hard fork. In addition to the reduction in costs, the network recorded a reduced number of daily active users (DAUs) between its high on July 26 at 961,196 users and its most recent recording on December 16 of only 367,000 DAUs.
Tokenomics for the post-Ethereum merge network were developed with the intention of facilitating the deflation of Ether. However, because gas fees have been going down and the number of DAUs has been going down, Ethereum has become inflationary over the previous 30 days by 0.073% and has added almost 7,100 ether. Since the merge, the Ethereum network has allegedly been inflationary by more than 1,192 Ether. This information comes from ultra sound money.
A decrease in the utilisation of DeFi is consistent with the price movement seen in Ether.
The total value locked measure is a popular method for analysing the state of a Proof of stake (PoS) blockchain like Ethereum in terms of both its health and its mood. On March 31, the TVL for Ethereum reached an all-time high of $83.9 billion, but since then, it has dropped by roughly $60 billion. The total value of the network’s TVL as of the 15th of December was $23.46 billion.
Over the course of a week, transaction volume and transaction fees fell across the board for each of the top 10 Ethereum protocols ranked by market capitalization. Notably, MakerDao and Uniswap both had a decrease in TVL that was 5.82% and 3.49% respectively.
Investor confidence continues to be hampered by the weight of regulatory pressure.
The Invest in America Act, also known as the infrastructure bill, was approved by Congress on August 9 and signed into law by Vice President Joe Biden. The blockchain community has voiced its opposition to the measure on the grounds that it contains terminology that could be damaging. The Act is scheduled to become law on the first of January in the year 2024.
If Ether is given the classification of a security in the United States, centralised exchanges (CEX) may be required to remove the cryptocurrency from their listing options for consumers located in the United States. The security classification may also have a negative influence on alternative cryptocurrencies, decentralised applications (DApps), and decentralised exchanges (DEX) that are based on Ethereum. The Securities and Exchange Commission (SEC) has not yet determined whether or not Ether satisfies the requirements of the Howey test.
The declaration made by the Commodity Futures Trading Commission (CFTC) that Ether has been designated as a commodity does not appear to be calming the concerns of any investors.
The expectations of investors for the year 2023
Even if the Shanghai hard fork is on the horizon, which would enable users to unstake Ether in March 2023, the price of Ether is anticipated to continue to be under sustained pressure.
Although investors’ appetite for high-risk assets and their interest in DeFi may continue to wane, certain factors, such as a more transparent stance taken by regulators toward cryptocurrencies and the eventual expansion of Ethereum network-based protocols, may prove to be a long-term catalyst for price growth.