Ethereum's Underperformance Raises Concerns: Is Its Downtrend Over or Just Beginning?
Summary:
Despite an initial surge related to the Dencun upgrade, Ether (ETH) has struggled in the past month compared to Bitcoin and the wider crypto market, leading to questions about its downward trend. Ethereum's network activity has experienced a decrease, and its on-chain activity market share has been eroded by competitors like Solana. Ethereum's recovery has faced resistance at around the $3,600 mark, and technical indicators, including a bear flag on the daily chart, suggest it might see further correction before a sustained recovery.
Ether (ETH), despite initially surging to $4,091 ahead of the Dencun upgrade, has faltered in comparison to Bitcoin and the wider cryptocurrency market over the past month. This has provoked skepticism among traders as to whether ETH's drop in value will continue. To elucidate, Bitcoin's (BTC) value decreased by 18% during the same time span, while the overall crypto market’s worth declined by 16%. A combination of market and technical indicators hint that ETH might face a more pronounced correction before commencing a lasting recovery.
Shown in the ETH/USD daily chart from TradingView, the ETH/BTC ratio dipped throughout March. Despite its 8% increase this month, ETH’s performance pales in comparison to BTC and other top layer 1 tokens. While BTC observed a 30-day increase of 21%, other layer 1 tokens such as BNB Chain's BNB and Solana's SOL, saw their values surge by 44% and 76% respectively in the same period.
There are several reasons for ETH's lukewarm performance in March, including some factors specific to Bitcoin in 2024. U.S. spot Bitcoin ETFs' success since their Jan 11th sanction by the Securities and Exchange Commission is one such factor. Further, the upcoming Bitcoin supply halving, which traditionally triggers a surge in crypto prices, has also contributed to BTC's stronger performance. On top of these, Ethereum's network activity, has waned in the past week. Glassnode’s data reveals that active daily addresses on Ethereum fell from 622,963 on March 20 to 546,484 on March 26.
Despite Ethereum being the leading network in the layer 1 domain, Solana has started nibbling away at its market share in terms of on-chain activity and stablecoin transaction volume. On the other hand, ETH’s recovery attempts were hindered by substantial resistance at the $3,600 point, suggesting that this level is a major obstacle for its recovery.
According to IntoTheBlock's In/Out of the Money Around Price (IOMAP) model, this resistance is between the $3,534 and $3,639 range - where nearly 1.17 million addresses had previously purchased approximately 4.97 million ETH.
If this resistance level experiences increased seller activity in the short term, ETH's value may drop further. A bear flag currently appears on the daily chart after ETH reached a 27-month high of $4,093 on March 12 but dropped due to the broader crypto market adjustment. If a daily candlestick closes below the flag’s lower support line at $3,497, it could signal a bearish breakout and a potential fall to $3,060 - a 26% drop from the current value.
Meanwhile, the Relative Strength Index’s (RSI) positioning around 50 also demonstrates that sellers are inclined to trade during the recent $3,600 surge. As always, this article contains no investment advice or recommendations. All investment and trading actions carry a degree of risk, and readers should carry out their own research before making any decision.
Published At
3/28/2024 7:30:00 PM
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