Between October 6th and 12th, ETH prices fell 7%, reaching a 7-month low of $1520. Although it slightly rebounded to $1550 on October 13th, according to multiple indicators, investors' confidence and interest in ETH seem to be weakening
Between October 6th and 12th, ETH prices fell 7%, reaching a 7-month low of $1520. Although it slightly rebounded to $1550 on October 13th, according to multiple indicators, investors' confidence and interest in ETH seem to be weakening.
Some people may think that this move reflects a broader apathy towards cryptocurrencies, as evidenced by Google's search for "Ethereum" hitting its lowest point in three years. However, since July, ETH has been 15% below the total market value of counterfeit coins.
Interestingly, this price change coincides with Ethereum's 7-day average dropping to $1.80, the lowest level in the past 12 months. By comparison, just two months ago, it was over $4.70, which is considered a high cost threshold even for bulk startup and shutdown of the second tier.
Regulatory uncertainty and low collateral returns lead to a decrease in ETH prices
An important event affecting ETH prices was Cardano founder Charles Hoskinson's 2018 comment on the SEC Director William Hinman's classification of ETH as non securities. Hoskinson, also a co founder of Ethereum, claimed on October 8th that some form of "bias" had influenced regulators' decisions.
The Ethereum pledge has also attracted a decrease in interest from participants in the online verification process, dropping from 4.3% to 3.6% in just two months. This change occurred with the decrease in destruction mechanism activities leading to an increase in ETH supply, reversing the current scarcity trend.
Derivative data and declining TVL reflect bearish control
Careful study of derivative indicators will help to understand the positioning of professional ETH holders after price adjustments.
On October 12th, the ETH futures spread hit a five month low, indicating insufficient demand for leveraged long positions. Interestingly, even if the ETH price rises by 8.5% between September 27th and October 1st, it cannot push ETH futures above the neutral threshold of 5%.
In the past two months, Ethereum's Total Locked In Value (TVL) has decreased from 13.3 million ETHs to 12.5 million ETHs, indicating a decrease in demand. This trend reflects people's decreasing confidence in the DeFi industry and a smaller advantage compared to the 5% yield provided by traditional US dollar finance.
To assess the severity of the decline in TVL, it is useful to analyze indicators related to decentralized application (DApp) usage. Some DApps, including decentralized exchanges (DEX) and NFT markets, are not financially centralized, so the value sent is irrelevant.
But for Ethereum, the decline in TVL is accompanied by a decrease in activity for most DApps, including the leading DEXUniswap and the largest NFT market, OpenSea. The decline in demand in the gaming industry is also evident, with Stargate showing only 6180 active accounts online.
Although regulatory issues may not be directly related to ETH's classification as a commodity, they do have a negative impact on the DApp industry. Furthermore, there is no guarantee that the main pillars of the ecosystem, such as ConsenSys and the Ethereum Foundation, will not be affected by potential regulatory actions.
Considering the reduced demand for leveraged long positions, reduced collateral yields, regulatory uncertainty, and lack of widespread interest, the likelihood of ETH falling below $1500 remains relatively high.
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