Why did Ether plummet 20% in a week? Ether spot ETF faces obstacles, while the trend of repledging cools down.
Ethereum (ETH) surged to $4,000 this year, just a step away from its all-time high of $4,891. However, with Bitcoin prices sliding due to net outflows from ETFs, ETH also experienced a significant drop in the overall market to $3,200, briefly touching $3,000. With a decline of over 20% in just one week, what could be the possible reasons?
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Low probability of Ethereum spot ETF approval
Increased difficulty in applying for “collateralizable” assets
Mediocre performance of collateral protocol Ether.fi
Recently, in addition to the influence of Bitcoin prices, there has been a lot of discussion about the possibility of an Ethereum spot ETF being approved, which has boosted the price of Ethereum itself. However, the Ethereum spot ETF has been delayed by the U.S. Securities and Exchange Commission (SEC), and several professional ETF analysts do not hold high hopes for its approval in May, weakening the bullish factors for Ethereum once again.
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(ETH reaches $3,700, SEC delays BlackRock Ethereum ETF again)
(Probability of SEC approving Ethereum spot ETF decreasing before 5/23)
Some issuers have added the option to custody ETH as collateral in their application documents to earn Ethereum staking rewards, providing additional benefits for operators and investors. Although the general community believes that Ethereum’s deflation and product attractiveness are significant advantages, this policy may also lead the SEC to consider ETH as a security, adding further difficulty to its approval.
(Wall Street entering Ethereum staking? Fidelity Investments revises ETF application, hoping to open up Ethereum staking)
The collateral protocol Ether.fi, with a locked value of up to $2.56 billion, recently issued tokens called ETHERFI. Despite being the first-ranked collateral protocol, the token price did not perform remarkably well after its launch. This indicates that other collateral protocols may perform equally or even better than Ether.fi.
In the past, the hype around collateral and liquidity mining attracted many users to exchange Ethereum for “points” in hopes of receiving airdrops. However, this expectation may have been shattered. Only when EigenLayer is officially launched will it be possible to determine whether the collateral frenzy can bring Ethereum to another peak.
(Ether.fi will start a token airdrop at 8 p.m. tonight, Sun Yuchen receives 3.45 million ETHFI tokens)
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