3 Signs Ethereum is in Trouble Below $2,500

Ethereum (ETH) has recovered above $2,500 on several occasions since the cryptocurrency sold off in early August, but has been unable to maintain above this critical price level.

ETH Price Eyes Six Straight Red Daily Candle

Market participants expected spot Ethereum exchange-traded funds (ETFs) to push the price of ETH higher when trading begins on July 23.

As of this writing, Ether has been in the red for six consecutive days and $2,500 is showing strong resistance. Meanwhile, several technical and on-chain indicators are pointing to further corrections.

Let’s take a closer look at what is hurting the price of ETH and why the $2,500 level is important.

Weaknesses Ethereum ETF Flow

Ether is also suffering from the spot Ethereum ETF, which recorded net outflows of more than $10.9 million on November 1. In fact, these investment products have seen outflows of $478.5 million since they were launched on the US market on July 23rd.

The lack of investor interest is particularly concerning since institutional demand was seen as a key part of Ether’s appeal, as Ether’s gains occurred on May 21, two days before the ETF was approved by the Securities and Exchange Commission.

This is also reflected in all other Ether products. CoinShares’ latest Digital Asset Fund Flows Weekly Report points out that flows into Ethereum investment funds are at just $9.5, in contrast to the strength seen in Bitcoin (BTC) and Solana (SOL). One million people arrived during the week ending November 1.

relevant: Ethereum is like the ‘Amazon of the 1990s’ — 21Shares

By comparison, institutional investors have poured more than $2.1 billion into Bitcoin investment products.

Part of the reason Ether failed to sustain a recovery above $2,500 resistance was because ETF flows reflected this in spot Bitcoin ETFs, unfulfilling expectations that BTC prices would rise to new all-time highs in March.

Increased L1 competition

Ethereum’s high gas fees present an opportunity for competing layer 1 blockchains focused on high scalability to eat into market share in the space. Although some of the activity has shifted to Ethereum layer 2 solutions, some users and developers are opting for other top layer 1 alternatives such as BNB Chain (BNB), Solana, and Tron (TRX).

As a result, Ethereum’s network activity growth has lagged behind its competitors as more users opt for the lower-fee ecosystem.

For example, Ethereum’s unique active wallets (UAWs) associated with decentralized applications (DApps) on the platform have decreased by 16% over the past 30 days compared to a 19% increase on Solana and a 75% increase on Avalanche.

Similarly, total volume traded on the Ethereum network decreased by 9.6% over the same period, while volume on the BNB chain, Solana, and Avalanche increased by 1.5%, 10%, and 60%, respectively.

ETH dominance hits 3-year low.

Ethereum’s lackluster network fundamentals compared to its competitors are also reflected in its declining market share.

Ethereum’s market dominance continued its decline in 2024, hitting a 42-month low of 13% on November 4. This indicates that the largest altcoins by market capitalization are losing market share to Bitcoin and other altcoins.

Since Ethereum is the only altcoin with its own physical ETH, the downward trend in Ethereum’s market dominance and its price will likely depend on ETF inflows, noted cryptocurrency analyst Max Price.

“Following the money, I think of moving into ETH only when ETF inflows start to increase.”

Meanwhile, fellow analyst The Great Martis warned that ETH charts are showing a “bearish trend” with a possible fall below $1,000.

This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.