Ether (ETH) price fell on December 16 and the pre-FOMC rally to $1,350 was canceled after Federal Reserve Chairman Jerome Powell issued harsh statements following a 0.50% hike in interest rates.
The Ether sell-off comes after a market-wide decline that saw Ethereum network fees drop by 39.90% over the past 30 days.
The total amount locked in Ethereum-based smart contracts also via decentralized finance decreased by 4.49% in 24 hours.
In the wake of the FTX exchange scandal, regulators are trying to speed up new regulations in the cryptocurrency industry.
While some analysts believe that Ethereum still has many bullish catalysts that should justify investing in the asset, the on-chain data paints a bleak picture of its near-term price prospects.
Here are three reasons why the price of Ether is lower today.
Ethereum becomes hypertrophic as total revenue decreases
The price of Ether fell as daily fees on the Ethereum network fell to $2.9 million, down from pre-FTX levels of $12.8 million on June 13. at 961,196 users versus just 367,000 DAUs on December 16th.
The post-merge tokens on Ethereum are designed to help deflate ether. However, with lower gas fees and lower DAUs, Ethereum is inflationary by 0.073% over the past 30 days and has added more than 7,100 Ether. According to Ultrasonic Money, since the merger, the Ethereum network is inflated by over 1,192 Ethers.
The decline in DeFi usage is in line with the price action of Ether
The Total Value Lock metric is a popular way to examine the health and sentiment of a proof-of-stake (PoS) blockchain such as Ethereum. Ethereum’s TVL hit an annual high of $83.9 billion on March 31, but has lost nearly $60 billion since then. As of December 15, the network’s TVL affiliate was valued at $23.46 billion.
All of the top 10 Ethereum protocols by market capitalization faced headwinds, as they all saw TVL and fees drop over a 7-day period. Notably, MakerDao and Uniswap (UNI) are down 5.82% and 3.49% respectively in TVL.
Regulatory pressure continues to weigh on investor confidence
On August 9, the Investment in America (Infrastructure Act) Act was passed by Congress and signed into law by President Joe Biden. Members of the blockchain community have criticized the account for what they see as malicious language. The legislation is expected to enter into force in January 2024.
If ether is deemed a security in the US, centralized exchanges (CEX) may have to remove the altcoin for US-based customers. The security rating could also negatively impact altcoins, decentralized applications, and decentralized exchanges (DEX) built on Ethereum. The Securities and Exchange Commission (SEC) has not yet decided whether Ether will pass the Howey test.
The CFTC’s announcement that ether is a commodity doesn’t seem to assuage investors’ concerns either.
Investor expectations for 2023
Despite the impending Shanghai hard fork, which will allow users to withdraw Ether in March 2023, the price of Ether is likely to remain under pressure.
While investors’ appetite for riskier assets and their interest in DeFi may continue to wane, factors such as clarity in regulators’ stance on cryptocurrencies and eventual rise in protocols based on the Ethereum network could be a long-term catalyst for price growth. .
The views, ideas and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.