Ethereum price weekly analysis: Regulatory uncertainty triggers frenzied selling

Posted: 8 May 2018 11:32 am

What started as a positive week ends with a thud as ETH gets belted.

Key takeaways

  • Price is up on a week ago but big gains over the second half of last week have been heavily eroded.
  • There are signs of recovery.
  • Trading volumes are on the rise as buyers try to capitalise on the drop.

There's no better illustration of how volatile cryptocurrency prices can be if all you look at are short term moves than the last week or so. Ethereum was trading at around US$670 a week ago before rising to over $830 by the middle of last week. But then the profit taking we saw with bitcoin dragged the price down to $712.

Today's trading has seen the price move back up to around the $760 mark, suggesting the short term sell off has ended and the value is consolidating at around that level. Trading volumes have been following the price movements with high volumes, approaching the $4.3 billion mark during busy selling and buying periods, and settling around $3.1 billion during less volatile periods.

This pattern of steady price rises followed by rapid falls and then consolidation is what we've been seeing recently. Over the preceding two weeks, ETH steadily moved up just above $400 to double in value by last weekend. Then the price took a hit before settling back to the mid $700s. The Merkle provides some more technical detail around the pattern but the layman's summary is "two steps forward, one step back".

The big news with Ethereum and other cryptocurrency is a pending decision from the United States' Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). Those agencies have been looking at what sort of financial instrument Ethereum is.

A story published by the Wall Street Journal was widely interpreted as an expectation that a public meeting would be taking place where a decision on Ethereum's status as a financial instrument, and therefore how it is to be regulated, was to take place. But the journalist who wrote the story said via Twitter that the meeting was not a public one but a "working group".

I've been on a number working groups with government and associated agencies in Australia. The discussions in such meetings can be wide-ranging and often test out ideas that might never see the light of public scrutiny. That's not a bad thing. It means officials and legislators who set the rules receive information that has been carefully considered and that lots of options, and their potential outcomes, have been looked at.

However, it seems cryptocurrency markets, based on what was published, expected something more and, consequently when the news broke about the meeting, it seemed to trigger lots of market activity. Now that the meeting has been "downgraded" from being about a regulatory ruling to a working group discussion, I think we'll see a more stable market – until the next overblown rumour surfaces.

Disclosure: At the time of writing, the author holds BTC, EOS, ETH, XLM, ETN, LTC, ADA and XRP.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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