Why is Ethereum (ETH) price down today?

2024년 5월 14일18:42 UTC

On May 14, the price of Ether (ETH) dropped roughly 2.5% to a two-week low of $2,871. Ether’s drop mirrored similar downside moves in the broader crypto market, with the net capitalization falling by approximately 2.34% to $2.25 trillion.

Ether’s price drop appears to be influenced by several factors, including the dwindling hopes of a spot Ethereum exchange-traded fund (ETF) approval in the United States, reduced demand for Ethereum investment products and decreased network activity.

Let’s dive deeper into the reasons why Ether price is down today.

Traders fear the SEC will say ETH is a security and deny the spot ETF applications

Once the United States Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs on Jan. 10, it was expected that spot Ethereum ETFs would follow not long after.

The regulator’s recent issuance of a Wells notice to Ethereum-based protocol Uniswap on April 10 suggests that the SEC could be viewing Ether as a security, which lowers the chance of a spot Ethereum ETF being approved in the U.S.

Finance lawyer Scott Johnson shared snippets of official documents in a May 14 post on X suggesting that the SEC could be evaluating Ether’s security status ahead of its decision on the spot Ethereum ETF applications. Johnson noted that this “question was never asked” during the spot Bitcoin ETF approval process.

Bloomberg Senior ETF analyst James Seyffart weighed in on the issue, saying,

“Looks like odds just went up for SEC to deny Ethereum ETFs by claiming #Ethereum is a security.”

Seyffart also believes that the SEC might not categorize Ethereum as a security in upcoming decisions, “but I think this almost guarantees that the SEC is at least considering it.”

The possibility of an Ethereum U.S. ETF approval was dampened after the SEC postponed its decision on the Invesco and Galaxy Digital proposal on May 6, extending the deadline until July 2024. Moreover, the refusal of U.S. SEC Chair Gary Gensler to clarify whether Ethereum could be considered a security during his appearance on CNBC’s Squawk Box on May 7 further eroded investor confidence in the ETF’s prospects. Gensler’s appearance followed six crypto-related lawsuits in 2024.

Another Bloomberg ETF analyst, Eric Balchunas, says he wouldn’t be surprised if we don’t see an approval until 2025. Balchunas, who was previously optimistic about spot Ethereum ETF approvals, now says the “odds of approval are “slim to none.

The SEC is expected to make a ruling on VanEck’s application, which is due May 23, and the deadlines for ARK 21Shares and Hashdex are May 24 and May 30, respectively.

A denial is expected to negatively impact the trajectory of Ether’s price in the medium term.

Ethereum investment funds registered $14.4 million in outflows last week

Last week saw the first inflows into crypto investment products in five weeks as investors poured in $130 million, according to a May 14 report by CoinShares.

However, Ethereum investors were “hesitant” last week as Ether saw outflows of $14 million.

CoinShares analyst James Butterfill said,

“Low interaction by the U.S. regulators with ETF issuer applications for a spot Ethereum ETF has increased speculation that the ETF approval is not imminent; this has been reflected in outflows, which totaled US$14m last week.”

This increase in outflows in Ethereum investment products attests to the reduced confidence investors have in the token.

Related: Hong Kong Bitcoin, Ether ETFs wipe 2 weeks of inflow in a single day

Ethereum price falls on weak network activity

On-chain analysis for Ethereum has been unfavorable in recent weeks. According to data from CryptoQuant, active addresses on the Ethereum network hit their lowest in over a month.

The chart above reveals that the active addresses on blockchain dropped from 460,474 on March 20 to 350,454 on April 24. This metric recovered to 398,320 on April 29 before dropping to the current level of 359,432.

More data from DappRadar reveals that although the Ethereum network remains a powerhouse among layer 1 blockchains, handling a high number of transactions, this has reduced by 14.88% over the last seven days.

The reduced number of active addresses is also reinforced by a decline in total unique active wallets (UAW), which, according to the figure below, have dropped by 32% over the last week.

The decline in Ethereum’s on-chain activity has impacted demand for ETH, weighing down its price.

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