Ether (ETH) price is down on Dec. 16 and the pre-FOMC rally to $1,350 was obliterated after Federal Reserve chair Jerome Powell issued hawkish statements following a 0.50% hike in interest rates.
The Ether sell-off follows a market-wide decline that has sent Ethereum network fees plummeting by 39.90% in the past 30-days.
Daily Ethereum network fees and daily active users. Source: TokenTerminal
The total value locked in Ethereum-based smart contracts also decreased by decentralized finance by 4.49% in 24-hours.
Following the FTX exchange scandal, regulators are attempting to fast-track new regulations on the cryptocurrency sector.
Total USD value locked on the Ethereum network. Source: DefiLlama
While some analysts believe Ethereum still possesses multiple bullish catalysts that warrant investing in the asset, on-chain data paints a grim picture of its short-term price prospects.
Here are three reasons why Ether price is down today.
Ethereum turns inflationary as total revenue falls
Ether price fell as daily fees on the Ethereum network plummeted to $2.9 million, down from pre-FTX levels of $12.8 million on June 13. In addition to the decreasing fees, the network registered lower daily active users (DAUs) from a July 26 peak at 961,196 users to only 367,000 DAUs on Dec. 16.
Post-Ethereum merge tokenomics were designed to help Ether become deflationary. However, with gas fees declining and reduced DAUs, Ethereum has turned inflationary by 0.073% in the past 30-days and added over 7,100 Ether. According to ultra sound money, since the merge, Ethereum’s network is inflationary by over 1,192 Ether.
Ethereum supply. Source: ultra sound money
A decline in DeFi use aligns with Ether’s price action
The total value locked metric is a common way to examine the health and sentiment of a Proof of stake (PoS) blockchain like Ethereum. Ethereum’s TVL reached a yearly high at $83.9 billion on March 31, but since that point, it has shed nearly $60 billion. As of Dec. 15, the network’s TVL stands at $23.46 billion.
The top 10 Ethereum protocols by market cap faced headwinds, with all seeing a drop in TVL and fees over a 7-day…