Ethereum's Price Surge Faces Doubts Amidst Bearish Sentiment and Declining Metrics
Summary:
Ether's price surged by 31.3% but faces doubts in sustaining support amidst bearish sentiment and declining metrics on the Ethereum network. Negative developments in the cryptocurrency sector, including financial troubles for Grayscale and legal action against Binance and Coinbase, contribute to investor uncertainty. On-chain metrics highlight a decline in demand for Ethereum, while competitors benefit from stablecoin volumes. The article suggests that Ethereum's high transaction fees and lack of network activity could hinder price recovery.
Ether (ETH) experienced a significant surge of 31.3% from March 10 to March 18, aligning with the U.S. Federal Reserve injecting $300 billion to address Silicon Valley Bank's insolvency. Since then, Ether has been consistently maintaining a daily closing price above $1,600. However, doubts have now arisen among investors regarding Ether's ability to sustain this support level, given the prevailing bearish sentiment in the cryptocurrency space and declining metrics on the Ethereum network.
Over the past six months, the cryptocurrency sector has faced a series of negative developments. The owner of Grayscale mutual fund manager, Digital Currency Group (DCG), has encountered financial troubles, raising concerns that a portion of the $4.8 billion worth of ETH deposits held in the Grayscale Ethereum Trust could be liquidated to address DCG's debts. Additionally, two major global exchanges, Binance and Coinbase, are currently facing legal action from the U.S. Securities and Exchange Commission (SEC).
Initially, investors showed excitement when several requests for futures-based Ether exchange-traded funds (ETFs) emerged in early August. However, it is important to note that if approved, these instruments, unlike spot ETFs, would not involve actual ETH coins.
On-chain metrics indicate a decline in demand for Ethereum. The number of Ethereum addresses holding a minimum of $1,000 worth of ETH deposits has reached its lowest level in nearly six months, despite Ether's price reaching a peak of $2,130 in mid-April. Ethereum's average transaction fee remaining above $4 over the past six months has deterred potential investors. Furthermore, data on decentralized application (DApps) activity on the Ethereum network supports the notion of a lack of new users, with a decrease in the average number of active addresses across the top Ethereum network DApps.
The limitations imposed by Ethereum's relatively high transaction fees have constrained its network activity. Without an increase in network activity, catalysts for a price recovery, such as potential network upgrades and implementations that could lead to lower costs or enhanced user privacy, are lacking.
Competitors have started to benefit from stablecoin volumes, leaving Ethereum enthusiasts somewhat disappointed. Visa has incorporated Solana blockchain settlement capabilities, and Coinbase has announced its intention to assist partners in converting bridged versions of USDC to the new format. Furthermore, despite its historical association with Ethereum, MakerDAO's co-founder, Rune Christensen, has proposed developing the project's upcoming native chain based on Solana's codebase.
Given the prevailing bearish sentiment in the cryptocurrency market, the likelihood of Ether's price dipping below the $1,600 support level has increased.
Published At
9/5/2023 9:20:35 PM
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