1. Reduces the interest in the space for short-term focused investors;
You speak of short term investors as if it is a negative thing. I do not think it would reduce their interest, it might actually increase given that they can buy again at a cheap price.
2. It also reduces the interest in the space for projects aiming to quickly raise money on hype and never deliver.
How is this related to the price of Eth (per USD) dropping? Regardless of price, fraudsters will always find a way.