Ethereum prices fell today and a growing number of macroeconomic challenges are likely to continue to weigh on Ethereum prices for the foreseeable future.

Ethereum price fell on December 16, erasing a pre-FOMC rally to $1,350 after Federal Reserve Chairman Jerome Powell issued a hawkish statement following a 0.50% interest rate hike.

Ether price took another hit when Silvergate Capital Corporation decided to voluntarily liquidate Silvergate Bank. Silvergate Bank was one of the major crypto-friendly banks before a wave of companies dropped services due to liquidity issues.

The sell-off in Ethereum also triggered a wave of liquidations on Ethereum longs, totaling $70 million from March 1 to 8.

The wave of liquidations in Ethereum occurs as the increase in Ethereum transaction volume can offset the liquidation. That’s a 90% drop since March 2020.​

While some analysts believe that Ethereum still has multiple bullish catalysts that warrant investment in the asset, on-chain data paints a grim picture of its short-term price outlook.

Here are three reasons why Ethereum’s price is down today.

The total value locked in the Ethereum ecosystem fell in March

The total value locked metric is a common way to check the health and sentiment of proof-of-stake (PoS) blockchains such as Ethereum. Ethereum price fell as TVL across the Ethereum ecosystem fell from a monthly high of $29.7 billion on March 2 to a monthly low of $28.1 billion, while TVL fell by 1.75% in 24 hours on March 9.

Ethereum prices fell as net centralized exchange flows showed investors sending more funds to CEXs than withdrawing funds from decentralized exchanges. On March 7, 21.7 million more ETH were sent to centralized exchanges than were withdrawn. Typically, investors move funds to CEXs to sell deep liquidity.

Rising inflation raises concerns about bigger rate hikes

On March 7, Federal Reserve Chairman Jerome Powell addressed the U.S. Senate Committee on Banking, Housing, and Urban Affairs in his semiannual monetary policy report to Congress.

In prepared remarks, Powell hinted at raising interest rates to control inflation:

"The latest economic data have been stronger than expected, suggesting that final interest rate levels may be higher than previously expected. We will be prepared to accelerate the pace of rate hikes if overall data indicate the need for faster tightening. Restoring price stability may require us to maintain Tight monetary policy stance. Our primary focus is to use our tools to bring inflation back to our 2% target and keep longer-term inflation expectations well anchored."

Powell's comments reverberated across the stock market, which closely correlated with the price of ether. After expecting just a 0.25% hike on March 1, markets are now pricing in a 0.5% rate hike, according to CME's FedWatch tool.

Ethereum daily active users drop ahead of Shanghai upgrade

Despite briefly surpassing Bitcoin

For users who were more active on January 8, the Ethereum network continued to experience lower activity than Bitcoin. In addition to Bitcoin maintaining more active users than Ethereum, Yuga Labs, a top Ethereum-based non-fungible token (NFT) company, launched an NFT auction based on the Bitcoin blockchain on March 7, raising 16.4 million Dollar.

What investors expect in 2023

Initially, the Shanghai hard fork was scheduled to take place on March 14, but on March 2, Ethereum developers announced that the hard fork would be postponed to April. Although on-chain data suggests that the Shanghai hard fork will not bring significant selling pressure, Ethereum prices are likely to continue to fluctuate.​

While investor appetite for riskier assets and their interest in decentralized finance (DeFi) may continue to wane as the U.S. rolls out higher interest rates, regulators’ stance on cryptocurrencies is clear and the Ethereum network’s eventual Factors such as growth – Protocol-based protocols may prove to be a long-term catalyst for price growth.

C3 Tip: The views, thoughts and opinions expressed here are solely those of the author. This article does not contain investment opinions or recommendations. Every investment and transaction involves risk.