Ethereum on shaky ground as regulators issue warning regarding DeFi, NFTs
Hong Kong's regulatory agency has warned investors to steer clear from ETH-centered offerings, citing issues of instability and fraud.
- Despite its recent upgrades, Ethereum has failed to register any substantial gains.
- Rival networks including Solana and Binance Smart Chain have failed to capitalise on Ethereum's dipping DeFi dominance.
- Ethereum's highly anticipated transition to a proof-of-stake (PoS) consensus mechanism is slated to take place by the end of the year.
Ethereum has continued to see red over the past week, with the asset's annual losses recently scaling up to 31%. ETH is currently trading at AUD$2,518.
Since rising to AUD$2,800 earlier this month, Ethereum has continued to remain gripped by immense bearish pressure. The altcoin is down 25% over the past 30-day stretch despite its network undergoing an upgrade to a proof-of-stake (PoS) consensus on the Ropsten testnet.
Regulatory uncertainty could be to blame for ETH's series of sharp corrections, with Hong Kong's Securities and Futures Commission (SFC) releasing a detailed document to investors about the risks associated with investing in various ETH-based cryptos including non-fungible tokens (NFTs). The regulator added that the Ethereum-dominant DeFi market utilised opaque pricing standards, leaving many investors exposed to the risks of market fraud as well as poor liquidity.
While many had anticipated the ongoing updates to the ETH network to have a positive impact on the currency's price, investors have continued to seek out rival networks. Ethereum's merge is meant to mitigate many of its high energy consumption issues while optimising its total transaction output. The final switch will take place later this year, with core developer Parithosh Jayanthi adding that some bugs have emerged which will be fixed over the next month or so.
Rival networks fail to capitalise on ETH's dipping dominance
Despite Ethereum's total value locked (TVL) data plummeting by over 50% since May, rival networks have failed to capitalise on the opportunity. Solana, a "high-performance, scalable" blockchain network, recently faced its fifth major network outage in 2022 with no new blocks being issued for a period of 251 minutes. Validators had to take major remedial steps (including a complete network resync) to address the problem.
Binance Smart Chain (BSC) was also faced with a similar fate after its native token BNB shed approx. 10% of its value earlier this week. The dip emanated as a result of the United States Securities and Exchange Commission (SEC) announcing that it was launching a probe into the exchanges financial activities, claiming that Binance could potentially be partaking in illicit money laundering.
Disclosure: The author owns a range of cryptocurrencies at the time of writing
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