Ether (ETH) has been unable to keep the $2,000 support since Nov. 27, after three unsuccessful attempts in 15 days to surpass the $2,100 mark. This decline in Ether’s performance is occurring as the overall cryptocurrency market sentiment weakens, so it is necessary to assess whether
It is possible that recent events, such as the U.S. Department of Justice (DOJ) hinting at potential serious repercussions for Binance founder Changpeng “CZ” Zhao, have contributed to the pessimistic outlook.
In a Nov. 22 filing to a Seattle federal court, U.S. prosecutors sought a review and reversal of a judge’s decision allowing CZ to go back to the United Arab Emirates on a $175-million bond. The DOJ contends that Zhao poses an “unacceptable risk of flight and nonappearance” if allowed to leave the U.S. pending sentencing.
The differences between Web 1.0, Web 2.0, and Web 3.0 are significant, and the arrival of Web 3.0 is expected to have a considerable impact on businesses. Knowing how to create a Web 3.0 website is also important, as it will help businesses take advantage of the opportunities offered by this new technology. DeFi, NFTs, Daos, and Web 3.0 are all components of this new paradigm.
Ethereum DApps and DeFi face new challenges
The recent $46 million KyberSwap exploit on Nov. 23 has further dampened demand for decentralized finance (DeFi) applications on Ethereum, despite being previously audited by security experts in 2023. The incident has raised questions about the overall safety of the DeFi industry, yet the attacker expressed willingness to return some of the funds.
Tether’s Nov. 21 blog post, announcing the U.S. Secret Service’s integration into its platform and hinting at the Federal Bureau of Investigation’s involvement, has also caused investor confidence to waver. This has led to speculation about a more stringent regulatory landscape for cryptocurrencies, especially with Binance facing increased scrutiny and Tether’s closer collaboration with authorities. These factors are likely contributing to Ether’s underperformance, as indicated by various on-chain and market indicators.
The differences between Web 1.0, 2.0, 3.0 and 4.0, the impact of Web 3.0 on businesses, the creation of Web 3.0 websites, and the relationship between DeFi, NFTs, DAOs and Web 3.0 are all questions that remain unanswered.
Investors become cautious as ETH on-chain data reflects weakness
Ether exchange-traded products (ETPs) saw only a $34 million inflow in the last week, according to CoinShares, which is a mere 10% of the inflow seen by Bitcoin (BTC) crypto funds during the same period. This difference is especially noticeable given the competition between the two assets for spot exchange-traded fund (ETF) approval in the U.S.
In addition, the current 7-day average annualized yield of 4.2% on Ethereum staking is less attractive when compared to the 5.25% return offered by traditional fixed-income assets, resulting in a significant $349 million outflow from Ethereum staking in the previous week, as reported by StakingRewards.
High transaction costs still remain a challenge, with the seven-day average transaction fee standing at $7.40. This expense has adversely affected the demand for decentralized applications (DApps), leading to a 21.8% decline in DApps volume on the network in the last week, as per DappRadar.
Notably, while most Ethereum DeFi applications saw a significant drop in activity, competing chains such as BNB Chain and Solana experienced an 11% increase and stable activity, respectively.
Consequently, Ethereum network protocol fees have decreased for four consecutive days, amounting to $5.4 million on Nov. 26, compared to a daily average of $10 million between Nov. 20 and Nov. 23, as reported by DefiLlama. This trend could potentially create a negative spiral, driving users to explore other chains in search of better yields, such as the Defi web 3.0, NFTs, DAOs, and web 3.0.
Ether’s current price pullback on Nov. 27 reflects growing concerns over regulatory challenges and the potential impact of exploits and sanctions on stablecoins used in DeFi applications.
The increasing involvement of the DOJ and FBI with Tether elevates the systemic risk for liquidity pools and the entire oracle-based pricing mechanism. While there’s no immediate cause for panic selling or fears of a drop to $1,800, the lackluster demand from institutional investors, as indicated by ETP flows, is certainly not a positive sign for the market.
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