Ethereum plunges 20% in a week due to difficulties with Ethereum spot ETF approval and fading craze for re-collateralization.

Ethereum (ETH) surged to $4,000 this year, approaching its all-time high of $4,891. However, as the price of Bitcoin declined due to net outflows from ETFs, ETH also dropped significantly to around $3,200, briefly touching $3,000. With a drop of over 20% in just one week, what could be the possible reasons for this?

Low Probability for Ethereum Spot ETF Approval

Recently, in addition to the boost in Bitcoin prices, there has been discussion around the potential approval of an Ethereum spot ETF.

However, the approval of the Ethereum spot ETF by the U.S. Securities and Exchange Commission (SEC) has been delayed, and several professional ETF analysts are not optimistic about its approval in May, weakening the driving force behind Ethereum's rise once again.

ETH Reaches $3,700, SEC Delays BlackRock Ethereum ETF Again

The probability of SEC approving the Ethereum spot ETF before 5/23 is decreasing

Increased Difficulty in Issuer's Application for "Collateralizable" Tokens

Some issuers have added the ability to custody ETH for staking in their application documents, allowing them to earn Ethereum staking rewards, providing additional benefits for operators and investors.

Although the general community sees this as a positive for reducing Ethereum supply and increasing product appeal, this policy may also lead the SEC to consider ETH as a security, adding further complexity to its approval.

Wall Street Enters Staking ETH? Fidelity Investments Amends ETF Application, Hoping to Open up Ethereum Staking

Performance of Re-Staking Protocol Ether.fi Token is Average

The re-staking protocol Ether.fi, with a locked value of up to $2.56 billion, recently issued the token ETHERFI. Despite being the first-ranking re-staking protocol, the token's performance after issuance was not impressive. This reveals that other re-staking protocols may perform similarly to Ether.fi at best.

Due to the past craze around staking and re-staking, many users eagerly exchanged Ethereum for "points" in hopes of receiving airdrops, but these expectations may have been shattered.

Only when EigenLayer officially issues tokens will it be revealed whether the re-staking craze can bring Ethereum to another peak.

Ether.fi will start a token airdrop at 8 p.m. tonight, with Justin Sun receiving 3.45 million ETHFI tokens