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Why is the price of Ethereum (ETH) down today?

BusinessCryptoWhy is the price of Ethereum (ETH) down today?
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ether (ETH) After the New York break, the price fell to a monthly low of $1,379 on March 10. attorney general Letitia James in a lawsuit against major crypto exchange KuCoin alleges that ether is a security under the law, while not registering the securities.

Ether price took another blow when Silicon Valley Bank stock lost $80 billion a day later on March 9 Silvergate Capital Corporation Decided to voluntarily liquidate Silvergate Bank.

Silvergate Bank was one of the leading crypto-friendly banks before a wave of companies dropped its services due to liquidity concerns. Silicon Valley Bank There is also a crypto-friendly bank, which provides services to venture capital firms such as Sequoia and a16z.

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On top of regulatory and bank-related hurdles, the price of ether has followed the direction of bitcoin and the broader crypto market following the release by Federal Reserve Chairman Jerome Powell. sarcastic statement Regarding inflation in the US, market participants expect interest rates to rise by 0.50% or more at the March 22 Federal Open Market Committee meeting.

The Ether selloff also ignited a wave of Ethereum Long Liquidation More than $42 million worth of contracts were liquidated on March 9.

Ethereum long liquidation. Source: Glassnode

The long Ether liquidation rush occurs when the Ethereum volume, which can offset the liquidation, is Down 90% since March 2020.

Although some Analysts believe that Ethereum While there are still many bullish catalysts that warrant investment in the asset, on-chain data paints a grim picture of its short-term price prospects.

Here are three reasons why the price of ether dropped today.

Regulators turn their attention to Ether

The debate about whether ether should be classified as a security token In the United States, not new but leading to a lack of investor confidence. US regulators are moving to quick action on the cryptocurrency ecosystem.

While the US Commodity Futures Trading Commission the chair perceives the ether Is a commodity rather than a security, the New York AG disagrees. In a press release, James said,

“This action is the first time a regulator is claiming in court that ETH, one of the largest cryptocurrencies available, is a security. The petition argues that ETH, like LUNA and UST, is a speculative asset that ETH rely on the efforts of third-party developers to provide benefits to holders of ETH. Because of this, KuCoin was required to register before selling ETH, LUNA, or UST.”

Republican members in the US Congress continue to criticize the Biden administration over this digital asset policyBut if Ethereum is considered a security in the United States, centralized exchange May be forced to remove ether for US customers. Security classification can also have a negative impact. altcoins, dap And decentralized exchange Built on Ethereum.

The total value locked in the Ethereum ecosystem decreases

The Total Value Locked metric is a common way to check the health and sentiment of proof of stake (POS) blockchain like Ethereum. Ether price declined as TVL in the Ethereum ecosystem fell from a monthly high of $29.7B on March 2 to a monthly low of $26.1B. TVL hit a monthly low on March 10 with a massive 24-hour drop of 7.2%.

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Ethereum Ecosystem Total Value Locked. Source: Defilama

Ether Price Drops As It Comes centralized exchange Netflow shows investors pulling funds out of centralized exchanges, possibly due to the KuCoin news. A further 43,000 ether were withdrawn from centralized exchanges on 10 March.

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Ethereum Exchange Netflow. Source: Cryptoquant

Ethereum Daily Active Users Decrease Ahead of Shanghai Upgrade

On March 7, Federal Reserve Chairman Powell addressed the US Senate Committee on Banking, Housing and Urban Affairs in a semi-annual monetary policy report to Congress.

in ready commentsPowell hints at higher interest rate hikes to control inflation,

“The latest economic data came in stronger than expected, suggesting that the final level of interest rates is likely to be higher than previously thought. If the totality of the data indicates that a faster tightening is necessary, then we will consider a rate hike.” Will be ready to raise the pace. To restore price stability, it will probably be necessary that we maintain the accommodative stance of monetary policy for some time. Our broad focus will be on bringing inflation back to our 2 per cent target is using our tools to keep inflation expectations well stable.

Powell’s comments resonated throughout the stock market, closely correlating with the price of ether. According to CME’s FedWatch tool, after expecting only a 0.25% basis point interest rate hike on March 1, the market is now expecting a 0.50% basis point interest rate hike.

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interest rate potential. cme group

Investors’ Expectations for 2023

in the beginning shanghai was the hard fork Slated for March 14. On March 2, Ethereum developers announced Hard fork delayed until April. Shanghai will not implement hard fork despite on-chain data massive selling pressureThe price of Ether is likely to remain volatile.

While investor appetite for high-risk assets and their interest in DeFi may have waned with the rollout of higher interest rates in the US, factors such as clarity on regulators’ stance on cryptocurrencies and the eventual growth of the Ethereum network-based protocol may prove to be factors. Are. To be a long term catalyst for value addition.