Ethereum Navigates Price Resistance and Regulatory Challenges Amid Bullish Hopes
Summary:
Ether's price faced resistance at the $4,100 mark leading to a 9% reduction over the week. Despite this decline, hopes hang on the potential approval of the spot Ethereum ETF by the SEC. Moreover, recent upgrades to the Ethereum protocol and the network's current leading position in terms of deposits provide some optimism. On the other hand, regulatory hurdles in the US and investigation into Ether's status as a security by the SEC could pose mid-term price challenges.
The price of Ether (ETH) suffered a notable setback after hitting strong resistance at $4,100 on March 12. Over the past week, Ether experienced a 9% reduction, underperforming relative to the wider cryptocurrency market, leading market players to question if Ether's current support level of $3,200 can uphold. To put it into perspective, the overall cryptocurrency market cap witnessed a fall of 2.5% in the same period.
In the bullish perspective, the potential green-lighting of a spot Ethereum exchange-traded fund (ETF) is a major bullish catalyst. The evaluation by the US Securities and Exchange Commission (SEC) of this matter is in progress, with a decisive verdict expected around May 23. Nevertheless, James Seyffart, the senior ETF analyst for Bloomberg, does not foresee approval as his base case scenario.
The recent enhancements to the Ethereum protocol are significant. The Dencun hard fork which was executed on March 13 aims to augment the network's potential and advances layer-2 data handling capacities and is heavily targeted by roll-up solutions. As a consequence, transaction charges on popular platforms like Arbitrum, Optimism, and Base have considerably declined.
As per Cointelegraph, Dencun’s improvements in principle should inspire Ethereum users to adopt layer-2 solutions. Data reveals an increase in 7-day volumes for Arbitrum, Optimism, and Base by 145%, 144%, and 203%, respectively, thus relieving some of Ether’s price downward pressure attributable to lofty gas fees.
It is noteworthy that rivals such as BNB Chain (BNB) and Solana (SOL) provide significantly lesser transaction costs at the base layer, making them more appealing to beginners. Despite the positive effects on Ethereum’s ecosystem, the volumes of Solana’s decentralized applications (DApps) have grown by 57% over the last week according to DappRadar.
On the flip side, Ether’s mid-term price bearish forecast is fortified by the increasingly intricate regulatory conditions in the United States. As reported by Cointelegraph on March 20, the SEC is investigating firms for possible links with the Ethereum Foundation in an effort to categorize Ether as a security.
This SEC maneuver was allegedly activated by Ethereum’s transition from a proof-of-work to proof-of-stake network and several US companies being asked to provide financial records and documentation about their links with the Ethereum Foundation.
Market specialists, including Van Buren Capital and Attorney Scott Johnsson, propose that the SEC's investigation into Ether's status as a security provides "extra justification for denying" the spot Ether ETF requests. However, this standpoint does not have complete acceptance, with Coinbase’s chief legal officer, Paul Grewal, arguing "The SEC lacks a valid motive to reject the Ether ETP applications."
To assess if professional traders flipped bearish after Ether’s price dip, the ETH options 25% delta skew is a suitable reference. A skew metric surpassing 7% indicates expectations of price fall, whereas a negative 7% skew is usually a reflection of bullish sentiment.
Since March 21, the ETH options 25% skew has escalated from 0% to 5%, implying a careful skepticism around the $3,200 support level. Over the past week, despite an 11% dip in Ether's price, the skew metric has remained in neutral territory, demonstrating minimal signs of intensified bearish sentiment.
Taking the broader view, the Ethereum network continues to top the chart in terms of deposits, with $94 billion as its total value locked (TVL). The announcement by BlackRock, the globe's largest asset manager, to kick start a tokenized asset fund on Ethereum reinforces the network's dominance. As a result, there appears to be no robust reason to question whether Ether's $3,200 support will rupture in the near future.
This piece contains no investment advice or suggestions. Every investment and trade transaction carries risk, and readers must conduct an independent investigation before making decisions.
Published At
3/23/2024 3:30:00 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.