According to Cointelegraph: Ethereum (ETH) is struggling to stay above the $2,000 mark following its third failed attempt in 15 days to surpass $2,100. This downturn aligns with an overall waning sentiment in the broader crypto market, potentially precipitated by recent regulatory issues involving key crypto figures like Binance founder Changpeng “CZ” Zhao.
On November 22, U.S. prosecutors sought to reverse a judge's decision that allowed CZ to return to the United Arab Emirates on a $175 million bond. The Department of Justice (DOJ) argues that Zhao represents an "unacceptable risk of flight and nonappearance" if allowed to leave pending sentencing.
This regulatory scrutiny, coupled with cybersecurity concerns linked to a week-old KyberSwap exploit costing $46 million, have contributed to a reduced demand for decentralized finance (DeFi) applications on Ethereum. Despite previous audits by security experts, the attack has amplified concerns about DeFi safety.
Adding to investor concerns, a November 21 blog post from Tether, the company behind the USDT stablecoin, announced the integration of the U.S. Secret Service into its platform, hinting at potential future collaboration with the Federal Bureau of Investigation. The vague nature of the announcement has led to speculations about a more stringent regulatory environment for cryptocurrencies, feeding into the recent decrease in Ethereum's value.
On-chain and market indicators also suggest a decline in Ethereum demand, with Ether exchange-traded products (ETPs) seeing weekly inflows of just $34 million, a small fraction compared to the inflows for its Bitcoin counterparts.
Furthermore, an average annualized staking yield of 4.2% for Ethereum is less appealing compared with a 5.25% return from traditional fixed-income assets. This discrepancy contributed to notable outflows of $349 million from Ethereum staking in the past week.
High transaction costs and the corresponding 21.8% drop in DApps volume on the network over the last week – alongside increased activity on competing chains like BNB Chain and Solana – further cloud Ethereum's outlook.
As Ethereum faces regulatory challenges and the ramifications of exploits on its applications, its price pullback highlights market concerns. Increasing involvement by the DOJ and FBI with Tether raises systemic risks for liquidity pools and the entire oracle-based pricing mechanism in the DeFi sphere. While there's no immediate cause for a sell-off or fears of a drop to $1,800, the lack of demand from institutional investors, as signified by ETP flows, paints a less optimistic picture for the market.
