Ethereum performance could hang on US election due to DeFi's regulatory hurdles
|- Ethereum investors expect increased volatility as the US election draws near, considering DeFi's regulatory uncertainties.
- A few whales sold portions of their holdings in contrast to ETH ETF inflows.
- Ethereum could reclaim the $2,395 level if it bounces off a key trendline.
Ethereum (ETH) is down over 4% on Thursday as traders expect high volatility with the US elections approaching. The election results could spark a massive price movement in ETH due to regulatory hurdles the DeFi ecosystem has yet to overcome.
Ethereum sees rising volatility ahead of US election
Due to regulatory uncertainties surrounding the decentralized finance (DeFi) ecosystem, Ethereum traders are positioning for heightened volatility as the US presidential election approaches. The top altcoin's major value driver comes from the host of DeFi protocols that run on top of its blockchain. Hence, DeFi regulatory hurdles could affect ETH's performance.
"The upcoming US election could have a significant impact on ETH, particularly because of its ties to the DeFi ecosystem, which may face regulatory scrutiny depending on the election results," Nick Forster, the founder of DeFi options platform Derive, told FXStreet.
Ethereum's 30 days-to-expiry (DTE) at-the-money (ATM) implied volatility (IV) has increased to nearly 7% compared to Bitcoin's in the past year. Forster highlighted a notable forward volatility spike between October 25 and November 8 in ETH and BTC, rising by 76.6% and 69.8%, respectively.
"This data signals that ETH's heightened volatility is a direct reflection of traders' expectations for increased uncertainty, especially as we approach the US election," he said.
Several major crypto investors favor Republican candidate Donald Trump in the upcoming elections due to his public acknowledgment of the industry and promise to provide favorable regulations.
Additionally, many within the digital asset industry don't fancy Democratic candidate Vice President Kamala Harris either due to the Securities & Exchange Commission's (SEC) crackdown on crypto companies in the current regime.
Meanwhile, a few Ethereum whales have been on a selling spree following its 10% decline since October 1, per Lookonchain data.
ICO Whale Transactions
- Ethereum ICO whale, who received 150K ETH during the initial online sale, sold another 19K ETH ($47.54 million) in the past two days.
- A whale who has been unstaking his assets sold 5,000 ETH ($11.74 million) in the past 24 hours.
Conversely, Ethereum ETFs surprisingly posted net inflows of $19.8 million on Wednesday despite the price decline, per Farside Investors' data.
Ethereum's next move could be determined by key trendline
Ethereum is trading around $2,340 on Thursday, down 4% on the day, with over $65.8 million in liquidations in the past 24 hours — with long and short liquidations accounting for $57.55 million and $8.25 million, respectively, per Coinglass data.
ETH broke below the $2,395 level on Wednesday following persistent bearish pressure in the market. ETH is now attempting to move toward a key trendline extending from May 27. A bounce off this level could send the top altcoin back above the $2,395 level.
ETH/USDT daily chart
Investors looking to prevent prices from moving below their cost basis could support the move, considering ETH's highest demand region is the $2,316 to $2,383 range. According to IntoTheBlock's data, investors purchased 52.58 million ETH around this range.
However, a move below the trendline will see ETH find support between $2,100 and $2,207.
The Relative Strength Index (RSI) is below its neutral level, trending downwards after crossing below its moving average. The Stochastic Oscillator (Stoch) is far into its oversold region, indicating a potential reversal may be imminent.
A daily candlestick close below the $2,100 level will invalidate the thesis.
Cryptocurrency prices FAQs
Token launches influence demand and adoption among market participants. Listings on crypto exchanges deepen the liquidity for an asset and add new participants to an asset’s network. This is typically bullish for a digital asset.
A hack is an event in which an attacker captures a large volume of the asset from a DeFi bridge or hot wallet of an exchange or any other crypto platform via exploits, bugs or other methods. The exploiter then transfers these tokens out of the exchange platforms to ultimately sell or swap the assets for other cryptocurrencies or stablecoins. Such events often involve an en masse panic triggering a sell-off in the affected assets.
Macroeconomic events like the US Federal Reserve’s decision on interest rates influence crypto assets mainly through the direct impact they have on the US Dollar. An increase in interest rate typically negatively influences Bitcoin and altcoin prices, and vice versa. If the US Dollar index declines, risk assets and associated leverage for trading gets cheaper, in turn driving crypto prices higher.
Halvings are typically considered bullish events as they slash the block reward in half for miners, constricting the supply of the asset. At consistent demand if the supply reduces, the asset’s price climbs.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.