Ether (ETH) price is down on Dec 16 and the pre-FOMC rally to $1,350 was erased after Federal Reserve Chairman Jerome Powell issued “hawkish” statements following a 0.50 rise % in interest rates.
The sale of Ether follows a widespread market crash that has seen Ethereum network fees plummet 39.90% in the last 30 days.
The total value locked in Ethereum-based smart contracts also decreased by decentralized finance by 4.49% in 24 hours.
Following the FTX scandal, lawmakers are trying to speed up new regulations for the cryptocurrency sector.
While some analysts believe that Ethereum still possesses multiple bullish catalysts that justify investing in the asset, on-chain data paints a bleak picture of its near-term price prospects.
Here are three reasons why the Ether price has gone down today.
Ethereum Suffers From Minor Inflation As Total Revenue Falls
The price of Ether fell as daily Ethereum network fees plunged to $2.9 million, below pre-FTX crash levels of $12.8 million on June 13. In addition to the decline in fees, the network saw daily active users (DAUs) decline, from a high of 961,196 users on July 26 to just 367,000 DAUs on December 16.
Ethereum’s post-merge tokenomics was designed to help Ether become deflationary. However, with gas rates falling and DAUs shrinking, Ethereum has turned 0.073% inflationary in the last 30 days and has added over 7,100 Ether. According to ultra sound money, since The Merge, the Ethereum network is inflationary by more than 1,192 Ether.
DeFi usage decline coincides with Ether price decline
The total value locked metric is a common way to examine the health and sentiment of a proof-of-stake (PoS) blockchain like Ethereum. Ethereum’s TVL reached a yearly high of $83.9 billion on March 31, but has since lost nearly $60 billion. As of December 15, the TVL of the network was USD 23.460 million.
The top 10 Ethereum protocols by market capitalization faced headwinds, as all experienced a drop in their TVL and fees over a 7-day period. Notably, MakerDao and Uniswap (UNI) posted respective declines of 5.82% and 3.49% in TVL.
Regulatory pressure continues to weigh on investor confidence
On August 9, the Investment in America Act (infrastructure bill) was passed by Congress and signed by President Joe Biden. Members of the blockchain community criticized the bill for what they considered harmful language. The law will enter into force in January 2024.
If Ether is considered a security in the United States, centralized exchanges (CEXs) could be forced to delist the altcoin for US-based customers. The security classification could also negatively affect altcoins, DApps, and decentralized exchanges (DEXs) built on top of Ethereum. The Securities and Exchange Commission (SEC) has not yet decided whether Ether passes the Howey test.
The announcement by the Commodity Futures Trading Commission (CFTC), which declared Ether to be a commodity, does not seem to alleviate investor fears either.
Investor expectations for 2023
Despite the impending Shanghai hard fork, which will allow users to unlock their Ether in March 2023, the price of Ether is likely to remain under pressure.
Although investor appetite for high-risk assets and interest in DeFi could continue to wane, factors such as the clarity of regulators’ stance on cryptocurrencies and the eventual rise of protocols based on the Ethereum network could prove a catalyst. long-term for price growth.
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