Ethereum (ETH) price has experienced a significant drop, and various macroeconomic challenges could continue to affect its value for the foreseeable future. The recent downturn in ETH price was triggered by multiple factors, including a hawkish statement from the Federal Reserve Chair, the declining total value locked (TVL) in the Ethereum ecosystem, and the decline in daily active users. Additionally, the delay of the Shanghai hard fork and the declining interest in high-risk assets and decentralized finance (DeFi) may have also contributed to the downturn.
The TVL is a common metric used to examine the health and sentiment of a proof-of-stake (PoS) blockchain like Ethereum. The drop in the TVL across the Ethereum ecosystem was accompanied by a 1.75% 24-hour decrease in TVL on March 9. Furthermore, the Ethereum network continues to see less activity than Bitcoin, with a decline in daily active users, despite briefly overtaking Bitcoin for more active users on Jan. 8.
The hawkish statement from the Federal Reserve Chair regarding higher interest rate increases to control inflation has also impacted the stock market, which closely correlates to ETH’s price. After anticipating only a 0.25% interest rate increase on March 1, the market now expects a 0.5% interest rate increase. This increase in interest rates could lead to a decline in investors’ appetite for high-risk assets and their interest in DeFi, thereby affecting ETH’s price further.
The delay of the Shanghai hard fork, which was initially slated for March 14, could have also contributed to the decline in ETH’s price. The hard fork is expected to bring improvements to the Ethereum network-based protocols, but its delay may have caused volatility in ETH’s price. Nevertheless, factors like clarity on regulators’ stance on cryptocurrencies and the eventual increase in Ethereum network-based protocols may prove to be long-term catalysts for price growth.
Despite the current downturn, some analysts believe that Ethereum still possesses multiple bullish catalysts that warrant investing in the asset. However, on-chain data paints a grim picture of its short-term price prospects. The recent decline in ETH’s price should serve as a reminder to investors that every investment and trading move involves risk, and they should conduct their research before making any decision.
In summary, the recent downturn in Ethereum’s price can be attributed to various macroeconomic challenges, including declining TVL, declining daily active users, the delay of the Shanghai hard fork, and the rising interest rates. While these challenges could continue to weigh on ETH’s price for the foreseeable future, factors like regulators’ stance on cryptocurrencies and the eventual increase in Ethereum network-based protocols may prove to be long-term catalysts for price growth.
