Ethereum (ETH) price fell 12% between October 1 and October 3, unable to overcome the $2,650 resistance level. This bearish momentum erased all the gains of the past two weeks and the optimism that emerged after breaking the $3,000 support line two months ago.
Traders are now questioning whether Ether can recover to $2,800 and what conditions are needed for ETH to reverse its current trend and outperform the broader cryptocurrency market.
The price of Ethereum has fallen 5% since September 1, but the overall cryptocurrency market capitalization has increased by 1.4%.
ETH/USD (green) versus total cryptocurrency limit (blue). Source: TradingView
In particular, the Ethereum exchange-traded fund (ETF) launched in the U.S. in July disappointed investors, experiencing a total net outflow of $552 million since launch, according to data from Farside Investors. However, this is not the sole cause of Ethereum’s decline, but rather a result of declining investor appetite.
Some attribute the Ether price weakness to continued selling pressure from Vitalik Buterin and the Ethereum Foundation, while others cite an overall decline in demand for decentralized applications and cryptocurrencies. Regardless of the specific cause, several factors have kept the price of Ether below $2,800.
Many Ethereum supporters had high expectations, predicting that Ethereum would fall into deflation based on the ‘ultrasonic currency’ theory. However, this has not materialized over the past five months as changes to reduce layer 2 rollup costs have resulted in coin issuance rates turning positive. Essentially, Ethereum’s strategic adjustments have had a negative impact on Ether’s price.
Ethereum co-founder and mastermind Vitalik Buterin believes that the space allocated for specialized data storage areas (BLOB space) requires optimization. In a blog post dated September 28, he proposed reducing the maximum block size from the current 2.7MB to 1MB. This fix is intended to promote more balanced utilization of Layer 2 networks.
In addition to Ethereum’s increasingly complex roadmap, traders have observed Ethereum ICO participants offloading approximately 31,000 ETH over the past month after holding it since its launch in mid-2014. According to on-chain analytics platform Lookonchain, the company acquired 150,000 ETH during Ether’s initial offering.
Likewise, Vitalik Buterin transferred approximately $10 million worth of Ethereum to a wallet connected to a cryptocurrency exchange last August to support various projects within the Ethereum ecosystem. At the same time, the Ethereum Foundation transferred more than $207 million to cryptocurrency exchanges to support and expand the Ethereum ecosystem.
Ethereum network activity no longer indicates ETH price decline.
However, based on Ethereum network data, investors have no reason to believe that the price of Ethereum will underperform the broader market trend. Ether’s key capabilities derive from its decentralized processing capabilities, evidenced by powerful metrics such as the total value deposited in smart contracts on the network and the overall volume of decentralized applications (DApps).
We ranked the top blockchains based on 7-day trading volume (USD). Source: DappRadar
In particular, Ethereum still leads the market with a trading volume of $26.2 billion. More importantly, the number of active addresses increased by 27% and transaction volume increased by 41% over the past seven days. In comparison, the BNB Chain (BNB) saw a 15% decrease in users compared to the previous week, while the TON network saw a 35% decrease in active addresses.
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Highlights on the Ethereum network included a 33% increase in trading volume on Uniswap and a 122% surge in Balancer volume, reaching $5.4 billion in 7 days. Curve also processed 143% more volume, resulting in a significant increase in user engagement and transaction activity. In terms of active addresses, EigenLayer grew 114% in a week, while Etherfi’s numbers increased nearly four-fold.
Ultimately, Ether’s path to reclaiming $2,800 appears to depend less on robust decentralized application activity and more on balancing scalability with the incentives for ETH investors to hold on. This includes expectations of returns from staking or increased demand for layer 2 processing fees.
This article is written for general information purposes and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.