Ether (ETH) price is down on May 17, reaching a 7-day low of $1,788. The Ether price drop comes a day after Chinese prosecutors vowed to crack down on the NFT market.
Ether price was dealt another blow with lawmakers in the United Kingdom claiming that crypto assets should be regulated like gambling due to the high-risk nature of investing.
On top of regulatory headwinds, Ether price has followed the direction of Bitcoin (BTC) price which lost the key $27,000 support level on May 17. Some analysts believe this will send the Bitcoin price to $25,000.
Here are three reasons why Ether price is down today.
Liquidations and low volume
The Ether sell-off also ignited a wave of Ethereum leveraged liquidations, with 26,158 traders being liquidated to the tune of $56 million on May 17.
Related: Ordinals turned Bitcoin into a worse version of Ethereum: Can we fix it?
The rush of Ether liquidations comes as Ethereum trading volume, is down from a March 11 peak of $24.8 billion to only $1.9 billion. The major decrease in volume comes as other protocols including the Bitcoin BRC-20 standard and Dogecoin (DOGE) DRC-20 standard gain momentum.
Some analysts believe Ethereum will struggle to reach and stay above the $1,900 level in the short term.
Regulatory focus turns toward Ether
The debate surrounding whether Ether should be classified as a security token in the United States, is not new but it is leading to a lack of investor confidence. U.S. regulators are trending toward taking swift action on the cryptocurrency ecosystem.
While the U.S. Commodity Futures Trading Commission chair believes Ether is a commodity rather than a security, there is no clarification from the SEC.
In the U.S. Congress, Republican members continue to criticize the Biden administration over its digital asset policy, but if Ethereum is deemed a security in the United States, centralized exchanges may be forced to delist Ether for U.S. customers. The security classification could also negatively impact altcoins, DApps and decentralized exchanges built on Ethereum.
Total value locked in the Ethereum ecosystem plummets
Ether’s price drop comes as centralized exchange netflow shows investors adding funds to centralized exchanges. In 24-hours on May 17, Ether deposited on centralized exchanges increased 119%. .
Related: Bitcoin price capitulation below $26K increases as Friday’s BTC options expiry looms
Higher net deposits on centralized exchanges may translate to higher selling pressure and coupled with diminished trading volume, Ether price could drop further.
Investor expectations for 2023
On May 12, the Ethereum Beacon Chain experienced issues finalizing orders, causing transaction delays for over an hour. The finalization issue recovered in 25 minutes but it also caused major volatility in the Ether price.
While investors’ appetite for high-risk assets and their interest in DeFi could continue to diminish with the lack of clarity on regulators’ stance regarding cryptocurrencies, the emergence of new blockchains and reduction in volume. The eventual increase in Ethereum network-based protocols may prove to be a long-term catalyst for price growth.
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