Ether’s price has been trading at a higher level since November 23, maintaining support above the $2,000 level after shortly retesting $1,930 on November 21. Over the last week, the token’s price has grown by 2.5%, with the total market capitalisation increasing by 0.5%. This ceiling trend is attributed to the advanced improvement of decentralised applications (Dapps) metrics, increased protocol fees, and Ethereum’s dominance in the non-fungible token (NFT) market.
However, to assess the viability of Ether maintaining its $2,000 price, it is essential to consider the consequences of Binance’s recent regulatory difficulties following the plea deal with the United States Department of Justice.
Ethereum network conditions improve, investors fear drops
Binance takes the lead in trading volume for Ether spot transactions, representing 30% of ETH futures contracts’ open interest. The swift closure of Binance’s ETH derivatives contracts valued at $2.35 billion could carry substantial repercussions. Despite early assessments indicating minimal alterations in spreads and liquidity, Binance experienced net outflows amounting to $1.53 billion from November 21 to November 23, according to DefiLIama.
The regulatory challenges offer both risks and opportunities. Some praise Binance’s actions as a demonstration of sufficient reserves, while others show concerns about the $4.3-billion fine that the firm and its former CEO, Changpeng “CZ” Zhao, face. Bitcoin advocate Luke Broyles recommended that his followers withdraw their tokens from exchanges.
Anyone that claims to know which snowflake will cause the avalanche is naieve.
However… The #Binance $4.3 BILLION fine is a really big snowflake atop a really big pile of snow.
Act accordingly.
Self custody now.#Bitcoin— Luke Broyles (@luke_broyles) November 23, 2023
Given that Binance may continue its operations and safeguard all clients’ assets, the long-term implications of full compliance and increased scrutiny remain uncertain. Moreover, the partnership between Binance and stablecoins like Tether, TrueUSD (TUSD) and Binance USD (BUSD) raises further questions.
Government agencies that can access previously unrevealed money laundering and terrorist financing operations through Binance, encompassing fiat payment gateways and banking partners, may also pose regulatory actions against stablecoins providers. As Binance is the third-largest ETH staker in the world with $1.24 billion in deposits (data from DefiLlama), this news has been significantly negative to Ethereum.
However, there are positive aspects in recent regulatory changes as well. Binance’s shift toward complete compliance decreases the risks associated with unregulated exchanges, making it more probable for the U.S. Securities and Exchange Commission to approve spot exchange-traded fund (ETF) instruments for cryptocurrencies. Prominent mutual fund managers in the industry, such as BlackRock and Fidelity, have recently shown interest in introducing Ether spot-based ETFs.
Additionally, the SEC’s lawsuit against Kraken on November 20 does not contain Ether on its list of 16 cryptocurrencies as securities. This exclusion lowers the likelihood of regulatory acts against the Ethereum Foundation and entities involved in the 2015 initial coin offering (ICO), providing an optimistic sign amid regulatory uncertainties.
Ethereum network health and NFT markets surge
As per DappRadar, Ethereum Dapps achieved a total value locked (TVL) of $26 billion on November 23, posing a 5% rise compared to the previous week. However, a security attack considerably affected dYdX, leading to a 16% decline in the protocol’s deposits.
Although Ether’s market capitalisation lags Bitcoin at $248 billion compared to Bitcoin’s $728 billion, both generate comparable protocol revenues. In the last seven days, the Bitcoin network accrued $57.5 million in fees, while Ethereum collected $54.3 million. These figures exclude ecosystem fees from platforms like Lido, Uniswap, or Maker protocols.
Ethereum has also reclaimed its leading position in NFT sales, with $12.6 million in transactions within 24 hours. Though Bitcoin once led in NFT activity, Ethereum stands to be the preferred blockchain for prominent NFT projects.
Ethereum’s favourable showing on November 23 can be attributed to enhanced on-chain metrics, increasing anticipation of approval for a spot ETF, and diminished regulatory worries linked to the 2015 ICO.