Ether (ETH), the native token of Ethereum’s blockchain, saw a significant drop in its value on Friday, falling to its lowest level in two months. This decline was attributed to a combination of regulatory uncertainty and concerns over the banking sector.
Coinbase’s Selling Pressure
One of the main contributors to the selling pressure on ether was the Nasdaq-listed crypto exchange Coinbase (COIN). The selling pressure led to a decline of more than 8% in 24 hours, with ether falling to $1,392, the lowest since Jan. 12.
The decline in the Coinbase premium index, which measures the gap between ETH’s dollar-denominated price on Coinbase and ETH’s tether-denominated price on Binance, also contributed to the selling pressure. According to data tracked by South Korea-based CryptoQuant, the index slipped to its lowest level since Jan. 18.
CryptoQuant tweeted that “Coinbase led the selling pressure” in reference to the decline in the Coinbase premium.
Another factor contributing to the decline in ether’s value was regulatory uncertainty. The New York Attorney General’s decision to refer to ether as a security in its lawsuit against the cryptocurrency exchange KuCoin likely catalyzed the selling. If ether is deemed as a security and not a commodity, then the Securities and Exchange Commission (SEC) may subject ether investors to stringent requirements regarding registration, disclosure, and accreditation.
This move by the New York Attorney General’s office highlights the ongoing regulatory uncertainty in the cryptocurrency market, as regulators struggle to keep pace with the rapid growth and evolution of the industry.
Banking Sector Concerns
In addition to regulatory uncertainty, concerns over a liquidity crisis in the banking sector also added to the bearish pressures around ether. The Silicon Valley Bank (SVB) reportedly sold a significant amount of its bond holdings, raising concerns of a full-blown liquidity crisis in the banking sector.
This news sparked fears of a potential financial crisis, leading investors to shift their focus to safer assets such as gold and the US dollar, and away from riskier investments like cryptocurrencies.
In summary, ether’s decline to a two-month low was due to a combination of factors including selling pressure from Coinbase, regulatory uncertainty, and concerns over a liquidity crisis in the banking sector.