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Why is Ethereum’s price dropping?


Ethereum's price plummets well into the $700 range. What caused the sudden drop?

Ethereum's price has plummeted sharply into the $700 range and is still dropping at the time of writing. The immense drop was probably spurred on by two main factors.

The main factor is probably the release of a letter from the treasury department discussing the status of ICO tokens as securities.

Make no mistake, this is a highly consequential interpretation. Accordingly, any group or individual developer who both (A) sold newly created tokens to buyers (i.e. had an ICO) involving U.S. residents and (B) failed to register with FinCEN as a money transmitter, and perform the associated compliance KYC/AML obligations, can be charged under a federal felony criminal statute, 18 U.S.C § 1960, with unlicensed money transmission." - Coin Center

The Ethereum ecosystem is largely dependent on ICOs, with the bulk of them being conducted through Ether. A sudden and severe clampdown on ICOs might see demand for Ether dry up in a hurry. And many who bought Ether specifically for participating in upcoming ICOs may have been abruptly selling them off all at once. This sell off is visible in the sudden price fluctuations on the above chart.

The second reason might be the subsequently unfavourable technical analysis of prices and your everyday panic selling. With prices dropping so abruptly, there probably won't be too many people buying until it bottoms out, which is likely to exacerbate the immediate drop and magnify the impact of this news.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, SALT, BTC and NANO.

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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