Ether’s price has hit a 7-day low of $1,788 on May 17, following a sell-off triggered by Chinese prosecutors’ crackdown on the NFT market and the UK lawmakers’ proposal to regulate crypto assets like gambling. The price drop has been further exacerbated by the decline in Bitcoin’s price, which lost its key $27,000 support level, leading some analysts to predict that Bitcoin’s price could fall to $25,000.
The sell-off has also triggered a wave of Ethereum leveraged liquidations, with 26,158 traders being liquidated to the tune of $56 million on May 17. The decrease in trading volume of Ethereum, from a March 11 peak of $24.8 billion to only $1.9 billion, is another reason behind Ether’s price drop. The decrease in volume comes as other protocols gain momentum, including the Bitcoin BRC-20 standard and Dogecoin DRC-20 standard. Some analysts predict that Ethereum will struggle to reach and stay above the $1,900 level in the short term.
The ongoing debate over whether Ether should be classified as a security token in the US has also led to a lack of investor confidence. While the US Commodity Futures Trading Commission chair believes Ether is a commodity rather than a security, there is no clarification from the SEC. If Ethereum is deemed a security in the US, centralized exchanges may be forced to delist Ether for US customers, negatively impacting altcoins, DApps, and decentralized exchanges built on Ethereum.
The recent increase in net deposits on centralized exchanges may also translate to higher selling pressure, coupled with diminished trading volume, leading to further drops in Ether’s price. Moreover, the technical issues faced by the Ethereum Beacon Chain on May 12, causing transaction delays for over an hour, have also contributed to the volatility of Ether’s price.
Despite the regulatory headwinds and technical issues, the eventual increase in Ethereum network-based protocols may prove to be a long-term catalyst for price growth. However, until there is clarity on regulators’ stance regarding cryptocurrencies, investors’ appetite for high-risk assets and their interest in DeFi could continue to diminish.