Ethereum Experiences Volatile Trends Amid Broader Market Adjustments and Network Upgrades
Summary:
Between March 3 and March 13, Ether (ETH) experienced a 20% price increase, culminating in a double peak near $4,100. However, it underwent a 20% correction after the second peak. The article analyzes the ETH price movement, its downturn in comparison to the broader crypto market, several challenges faced by Solana, the Ethereum network upgrade, and Ether futures' bullish indications. The article highlights that Ether's base layer gas fees remain a significant issue despite the network upgrades. This analysis doesn't constitute investment advice or recommendations and encourages readers to do their own research before making any decision.
Between March 3 and March 13, Ether (ETH) saw its price escalate by 20%, resulting in a double peak nearly at the $4,100 level. However, after the second peak, Ether's value experienced a 20% pullback, bringing it down to test the $3,200 level as support on March 19. Analysts admit that the preceding price rally was driven by long positions that were significantly overleveraged. At this point, Ether's positive momentum has dwindled following the compulsory liquidation of ETH futures totaling $375 million over the preceding week. Nevertheless, the question remains if this step will be enough for Ether to halt its correction and possibly initiate a new bull phase.
Compared to other digital currencies, Ether didn't fare well during the decline. While the comprehensive crypto market capitalization peaked at $2.77 trillion on March 14 and then stabilized at around $2.35 trillion, marking a five-day decrease of 15.5%, Ether's performance fell behind. Its performance was hit by Bitcoin's (BTC) weekly drop of 12%, Solana's (SOL) 21% increase, and Binance Coin's (BNB) marginal 2% decrease during the same period.
Interestingly, Solana was grappling with corresponding transaction challenges due to elevated fees and transaction failures—even as the network battled to accommodate overload of activities fueled by an intense interest in newly launched memecoins. As reported by Cointelegraph, traders pumped nearly $100 million into new Solana memecoins in just three days.
On March 13, the Ethereum network rolled out its most substantial upgrade in over 12 months, which coincided with Ether's cyclical price peak in 2024. This hard fork considerably lowered transaction fees for layer-2 networks including Arbitrum, Optimism, and Base, thereby enhancing Ethereum's scalability. Furthermore, the introduction of data blobs boosted the network's data processing capacity.
This upgrade's success is confirmed by the subsequent surge in activity on layer-2 solutions to an all-time peak, with an average of 122 transactions per second (TPS) over the past two days, as reported by L2beat. This marks a 31% enhancement from the preceding week and is over eight times Ethereum’s base layer capacity at 15 TPS. However, despite the anticipation surrounding the upgrades of the Ethereum network, the base layer gas fees remain a significant concern, with the typical cost lingering around $12 as of March 18, according to BitInfoCharts. This situation underscores the continuing allure of other platforms such as Solana and Avalanche (AVAX), which were amongst the few cryptos in the top 20 to witness gains over the past week.
Moving on to a positive note, the 20% pullback in Ether since March 13 has pushed the ETH perpetual contract funding rate close to a near-zero level. It hints at a balance in demand between those holding long positions and those shorting, suggesting an equilibrium in the market.
Typically, futures traded on a monthly basis in such markets carry a 5% to 10% premium over the spot exchanges, reflecting the cost of carrying the investment until its settlement. However, Ether's futures traded at a 22% premium, an abnormally high rate indicating extreme demand for long positions, probably driven by optimism for Ethereum's upcoming decisions on spot exchange-traded funds (ETFs). Impressively, this level of optimism remains undiminished, even after Ether's price corrected to $3,200 on March 19, a phenomenon that could be perceived as positive amidst the larger market recalibration.
This piece does not serve as an investment guide or recommendation. Each investment or trading move carries risk, and readers should conduct their own analysis before making a decision.
Published At
3/19/2024 10:15:35 PM
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