Analyst Ali Martinez has shared a chart that he says explains why a drastic price drop can happen, and it works for any particular blockchain.
This time around it is the second largest DLT platform, Ethereum, which just recently passed long awaited Merge update.
This is why ETH could face a sharp price correction
The chart provided by Martinez shows that the number of new Ethereum wallets created per day has dropped significantly over the past 24 hours. In general, this is a decrease of more than 50%.
The analyst stated that if the number of new wallets created on any blockchain drops sharply, it usually means that there could be a big price correction on the horizon over time.
# Ethereum | Number of new addresses $ETH created per day has dropped significantly over the past 24 hours, falling by more than 50%.
Typically, a steady decline in the number of new addresses created on a given block chain will result in a sharp price correction over time. #ETH pic.twitter.com/ftrMJqWp0P
— Ali (@ali_charts) September 28, 2022
SEC Takes ETH Under US Jurisdiction
Earlier in the media space, the news spread that the head of the SEC, Gary Gensler, said that Ethereum falls under US jurisdiction which means that security laws can apply to it.
If the second largest cryptocurrency is treated as a security, then ETH holders will have to report directly to the SEC and pay taxes accordingly. However, this statement by Gensler could have caused a massive outflow of Ethereum from centralized trading platforms, especially those located in the US – Coinbase, Bittrex, etc.
However, this raises questions about how the ambitious regulator intends to gain control over the distribution of Ethereum and control the movement of ETH in the decentralized network; In this case, the ETH ecosystem will suffer great damage.
However, the SEC softened on Ethereum after that, and investors seem to have calmed down. As a result, net traffic in the network returned to normal figures.
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