Cryptocurrencies

Ethereum (ETH) has been under pressure since June 7 when it lost the $3,800 support level.

Ethereum (ETH) has been under pressure since June 7 when it lost the $3,800 support level. Despite a series of positive developments, its price remained below $3,600 on June 19 and showed no weekly variation.

Some analysts believe that the main reason for this downward momentum is the lack of institutional demand for cryptocurrencies. Others attribute it to regulatory uncertainty within the Ethereum ecosystem.

Risks to the Ethereum Ecosystem Persist Despite Ethereum Regulatory Clearance

source: Christmas Acheson

Noelle Acheson, author of the “Crypto is Macro Now” newsletter, said she was surprised by Ethereum’s lack of positive momentum following ConsenSys’ victory over the regulator. She also questions whether other regulatory issues related to collections could deter investor interest.

On June 18, Consensys, developer of the Ethereum ecosystem, announced that the United States Securities and Exchange Commission (SEC) had concluded its investigation into whether Ethereum could be considered a security and the company’s role in Ethereum sales. Consensys filed a lawsuit against the Securities and Exchange Commission in April after receiving a notice from Wells, which warned that its MetaMask wallet may have violated securities laws.

Ethereum’s decline coincided with Bitcoin (BTC), the leading cryptocurrency, facing a rejection of nearly $72,000 on June 7. This occurred as investors became increasingly concerned about the financial health of the United States, exacerbated by rising interest rates and deteriorating economic indicators such as rising wages and economic growth. Increase in unemployment rate. In May, the average hourly wage in the United States increased 0.4% from the previous month, while the unemployment rate increased to 4.0% from 3.9% in April.

Despite the potential benefits of cryptocurrencies in the event of a deterioration in macroeconomic conditions in the medium to long term, history has shown that investors tend to withdraw from risky assets when the threat of recession becomes imminent. The two-year U.S. Treasury yield rose to 4.71% from 4.94% on May 30, indicating that investors were aggressively buying these fixed-income instruments.

source: Don McArdle

Dan McArdle, co-founder of Case4Bitcoin, noted that as long as the macroeconomic environment remains stable, the cryptocurrency’s price appears reasonable and its long-term upward trend is likely to continue. However, McArdle warns that a “macro shock” or sharp correction in the S&P 500 would negatively impact cryptocurrencies in the short to medium term. Therefore, the current lack of interest in Ethereum could reflect growing investor concerns about a potential recession.

In addition to the recent development of Consensys, the regulatory news for Ether has been very positive. Securities and Exchange Commission Chairman Gary Gensler has confirmed that the launch of US exchange-traded funds (ETFs) will take place within three months. However, Ethereum faces its own challenges, including persistently high network processing fees, which topped $4 last week.

Recession risks and possible lack of demand for spot ETFs

Although Layer 2 scaling solutions like Optimism, Base, Arbitrum, and ZKSync have grown, some DApp volume has shifted to competitors like Solana, BNB Chain, and THORChain.

about: Bitwise’s Revised Ethereum ETF Filing Indicates Pantera Interested in $100M Purchase

Top blockchains ranked by 30-day decentralized application volume, in USD. Source: DabRadar

According to DappRadar, Ethereum is still the leader in terms of decentralized application volumes over the last 30 days, but it faces stiff competition. Competitors like Solana, Aptos, Celo and Phantom have far outpaced their growth. Additionally, the number of active addresses interacting with decentralized applications on the Ethereum network decreased by 40% in 30 days, while Solana and Aptos saw increases of 58% and 115%, respectively.

Ethereum’s failure to surpass $3,600, despite the impending launch of spot ETFs and the SEC’s regulatory clarification that Ethereum is not a security, includes deteriorating macroeconomic conditions and potential uncertainties regarding additional regulatory fees for token issuers, wallet providers and exchanges – a risk notably Noël Acheson.

Finally, the Bitcoin ETF’s recent consecutive four-day net outflows have raised concerns about whether Ethereum instruments will attract significant inflows as they approach their launch. Investors are concerned that Grayscale’s Ethereum Trust Fund ETHE could experience capital outflows once converted to an ETF, similar to the issues that plagued GBTC due to its high fees.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research before making a decision.

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