Market Insight: Ethereum (ETH) experiences price decline

Ether experience a low trading volume today despite traders’ transactions with other centralised exchanges.

The coin is currently reaching a 7-day low of $1,788, a day after Chinese prosecutors disclosed their intention to crack down on the NFT market.

The coin price is being dealt another blow as lawmakers in the United Kingdom are also claiming that crypto assets should be regulated due to their volatile nature.

In addition to facing regulatory challenges, Ether is likely to imitate the Bitcoin price fall which lost the key $27,000 support level on May 17.

Here are some factors responsible for the drop in Ether Price today.

Regulatory Spotlight on Ether

The recent debate on whether Ether should be swept under the security token in the United States, though not new but has a bad effect on the coin.

Investors are starting to get wary of the coin and trending towards taking swift action on the cryptocurrency ecosystem.

While Rostin Behman, the chairman of the Commodity Futures Trading Commission stress that, Ether should be seen as a commodity rather than a security, the SEC is yet to make a clarification on this.

Currently, the Biden administration is facing serious criticism from Republican members over its digital asset policy. However, if Ethereum is considered a security in the United States, it might be delisted for customers in the country by centralised exchanges.

This development is likely to affect altcoins, DApps and other decentralised exchanges hinged on the Ethereum network.

Market Plagued by Liquidations and Low Volume

The Ether rush comes after there was a low trading volume from a March 11 peak of $24.8 billion to only $1.9 billion. This downward projection is a result of other protocols including the Bitcoin BRC-20 standard and Dogecoin DRC-20 standard gain momentum.

Today, this significant sell-off of Ether led to a surge in Ethereum leveraged liquidations, resulting in the liquidation of 26,158 traders, amounting to $56 million in losses.

Ethereum Total Value locked Nose Dives

One other factor causing the Ethereum market shift is the fact that investors are adding funds to centralized exchanges.

The last 24 hours witnessed a 119% increase in Ethereum deposits on centralised exchanges.

This translates to increase selling pressure as well as diminished trading volume. If this persists, Ether’s price could plummet further.

Analyst Insights

Despite the challenges facing Ether, some analyst in the community strongly believes that Ethereum might struggle to stay above the $1,900 level in the short term.

Investors Anticipate Strong Returns in 2023: Bullish Sentiment Prevails

On May 12th, the Ethereum Beacon Chain encountered difficulties in completing transactions, leading to an hour-long delay. Although the issue was resolved within 25 minutes, it had a significant impact on the price of Ether, resulting in notable volatility.

Investor interest in DeFi and high-risk assets may drop, along with volume and the introduction of new blockchains, as regulators’ stance on cryptocurrencies remains ambiguous. However, the long-term development of protocols built on the Ethereum network may act as a potential driver of price rise.

Final Thought

It is important to note that we have not yet seen the last of the regulatory challenges that many cryptocurrencies are yet to face. Although this is considered best for the sake of reducing the high risk associated with these cryptocurrencies, there is also a need for transparency.