Although Ethereum (ETH-USD) remains down significantly over the course of 2022 there is little reason for optimism at this point.
There are a few recent pieces of information that should give bearish investors little reason to anticipate that ETH-USD could rise soon.
‘Responsible’ Regulation?
A leaked document related to President Joe Biden’s future direction for the cryptocurrency market has left investors none the wiser. That leaked document, which was later taken down, contained written remarks by Treasury Secretary Janet Yellen stating: “A presidential executive order on cryptocurrencies would ‘support responsible innovation’ as it coordinates U.S. policy across agencies.”
The leak caused Ethereum prices to spike only to quickly relent within a day. I think the clear explanation is that the news was vague and up to subjective interpretation. On the one hand, ‘support responsible innovation’ can be interpreted positively. If you believe responsible innovation means crypto will continue relatively unscathed, that’s a positive.
On the other hand, the phrase ‘support responsible innovation’ can easily equate to something more negative. Readers who believe in less government regulation, particularly in the crypto world, are probably skeptical about this vague regulatory proposal.
So the word ‘responsible’ should raise some eyebrows. Responsible in the eyes of the current administration likely equates to the imposition of multiple new regulations overall. In other words, ‘responsible innovation’ cam equal greater regulatory hurdles and therefore slowed innovation.
Russian Involvement
Crypto investors who were already worried about increased regulation have one more thing to worry about now: the Russian invasion of Ukraine.
Cryptocurrencies including Ethereum look increasingly attractive to the wrong people.
With sanctions being levied on anyone closely connected to President Putin, cryptocurrency stands to benefit. Reports are that Russian oligarchs have been pushing billions of dollars worth of assets into crypto. And why shouldn’t they? It’s a logical response regardless of what one thinks of their businesses or behavior.
Collateral Damage
But that’s a problem from the perspective of regulation. It is basically serving to accelerate Biden’s push for crypto regulation. The fear is not only that regulation will come sooner than it otherwise might have, but also that those regulations could be haphazardly constructed.
It isn’t hard to imagine that regulations resulting from a rush to respond to this spike in Russian-related crypto activity might end up haphazardly crafted and implemented.
That’s one more reason to rail against Russia’s invasion of Ukraine. The 351 sanctioned members of the Russian Duma along with other oligarchs are rumored to be putting their wealth into untraceable crypto. That, in turn, is prompting the Biden administration to likely accelerate its timeline to regulation. The humanitarian crisis is of course more concerning, but this is yet another example of how terrible and far-reaching the situation actually is.
In short, there’s a lot of bad news for Ethereum due to Russia.
More Bad News for Ethereum
Most of the Russia and regulation-related news affects all of the cryptocurrency market in a negative way. But there is other news that directly harms Ethereum as well while sparing other cryptos.
Terra (LUNA-USD) recently surpassed Ethereum to become the second most staked asset. As of March 5, the value of LUNA’s blockchain-staked assets reached $28 billion surpassing Ethereum and its $25 billion in staked value.
Ethereum remains far ahead of Terra in terms of total locked value but the achievement is momentous nonetheless. Coins including Solana (SOL-USD) have been eating away at Ethereum’s market dominance as measured by many metrics.
It doesn’t bode well for Ethereum at the moment and moving forward
What to Do With Ethereum
Regulation likely hurts Ethereum and the crypto space at large.
Russia’s invasion of Ukraine only hastens that regulation. Add that to an environment in which valid competitors seem to emerge every few months and you can see why bearish sentiment is currently following Ethereum.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
