Reasons why ETH price failed to rise in the face of good news
ETH has been under pressure since June 7, when it lost the $3,800 support level. Despite a series of positive developments, its price remained below $3,600 on June 19.
Despite ETH's regulatory approval, risks in the Ethereum ecosystem remain. On June 18, Ethereum ecosystem developer Consensys announced that the U.S. Securities and Exchange Commission (SEC) has concluded its investigation into whether Ethereum can be considered a security and the company's role in ETH sales. Consensys has filed legal action against the SEC after receiving a Wells notice in April, which warned that its MetaMask wallet may have violated securities laws.
Ethereum's decline coincides with the rejection of leading cryptocurrency Bitcoin near $72,000 on June 7. This occurred at a time when investors' concerns about the fiscal health of the United States increased, coupled with high interest rates and deteriorating economic indicators such as rising wages and unemployment. In May, the average hourly wage in the United States rose 0.4% from the previous month, while the unemployment rate rose to 4.0% from 3.9% in April. Although worsening macroeconomic conditions could be bullish for cryptocurrencies in the medium to long term, history shows that investors tend to move out of risky assets when recession risks loom. The decline in the U.S. 2-year Treasury yield from 4.94% to 4.71% on May 30 suggests that investors are actively buying these fixed-income instruments. As long as the macroeconomic environment remains stable and cryptocurrencies appear reasonably priced, their long-term bullish trend should continue. A macro shock or a sharp correction in the S&P 500 would have a negative impact on cryptocurrencies in the short to medium term. Therefore, the current lack of interest in Ethereum may reflect investors’ high concerns about a potential recession. In addition to the recent Consensys development, regulatory news on ETH has been generally positive. The SEC Chairman confirmed that a U.S. spot Ethereum exchange-traded fund (ETF) will be launched within three months. The recent four consecutive days of net outflows from spot Bitcoin ETFs have raised concerns about whether Ethereum instruments will attract significant inflows when they are launched. Investors are concerned that when Grayscale’s Ethereum Trust ETHE is converted into an ETF, it may suffer from similar problems as GBTC, which suffered from high fees.
