As a seasoned researcher with years of experience in the dynamic world of crypto, I have witnessed firsthand the rollercoaster ride that is Ethereum (ETH). The ongoing struggle for ETH to sustain above $2,500 is particularly intriguing, given the high hopes surrounding spot Ethereum exchange-traded funds (ETFs). However, the lack of investor interest and increasing competition from other layer-1 blockchains are undeniably hurting ETH’s price.
Ether (ETH) has bounced back above $2,500 multiple times following the significant cryptocurrency market drop in early August, yet it hasn’t managed to maintain its position above this crucial price point.
ETH price eyes sixth straight red daily candle
It is expected that the flow of investments into Ether exchange-traded funds (ETFs) will likely increase the value of Ether when trading begins on July 23, as market participants predict.
As I pen this down, Ether appears to be on a six-day losing streak, struggling to break through the barrier at $2,500. Various technical and on-chain indicators suggest that a more significant downturn might follow.
Let’s take a closer look at what’s hurting ETH’s price and why the $2,500 level is crucial.
Weak spot Ethereum ETF flows
Additionally, Ether has faced challenges with Exchange-Traded Funds (ETFs) tied to Ethereum, which experienced a net withdrawal of over $10.9 million on November 1 alone. Interestingly, since their launch in the U.S. market on July 23, these investment instruments have seen a total outflow of approximately $478.5 million.
It’s troubling that investors aren’t showing much interest, given that institutional demand has historically played a significant role in making Ether attractive. The rise in Ether’s value on May 21, two days before the Securities and Exchange Commission approved the ETFs, underscores this point. In simpler terms, it’s worrisome that investors aren’t showing more interest in Ether, as institutional demand has been a major factor contributing to its appeal. This is particularly relevant because the surge in Ether’s value occurred just before the Securities and Exchange Commission approved ETFs related to it.
This is also reflected across all other Ether products, with the latest Digital Asset Fund Flows Weekly Report by CoinShares pointing out that flows into Ethereum investment funds remain in contrast to the bullishness seen in Bitcoin (BTC) and Solana (SOL), with only $9.5 million inflows during the week ending Nov. 1.
Contrastingly, institutional investors funneled over $2.1 billion into Bitcoin-related investment schemes.
A significant factor behind Ether’s struggle to maintain growth beyond the $2,500 barrier is the discrepancy between anticipated exchange-traded fund (ETF) inflows mirroring those of Bitcoin spot ETFs, leading to a Bitcoin price surge to unprecedented highs in March.
Increasing L1 competition
The expensive transaction fees on Ethereum create an opening for competing first-layer blockchains that prioritize scalability to potentially capture a portion of Ethereum’s market in the sector. Although some transactions have shifted to Ethereum layer-2 options, some users and developers are instead choosing alternative top first-layer chains like Binance Smart Chain (BNB), Solana, and Tron (TRX).
In my analysis, I’ve observed that the expansion of activities within the Ethereum network is not keeping pace with its competitors, as an increasing number of users are choosing platforms offering reduced fees.
Over the past month, the number of Ethereum wallets actively interacting with decentralized applications (DApps) has decreased by about 16%, whereas Solana saw a rise of around 19%, and Avalanche experienced an impressive jump of nearly 75%.
During that timeframe, the amount of transactions conducted on the Ethereum network decreased by 9.6%, whereas transactions on Binance Smart Chain, Solana, and Avalanche rose by 1.5%, 10%, and 60% respectively.
ETH dominance hits 3-year lows
The weak foundations of Ethereum’s network compared to its competitors are similarly mirrored by a decline in its market dominance.
In 2024, Ether’s market control kept declining, dropping to a 42-month minimum of 13% on November 4th. This suggests that the top cryptocurrency by market value is gradually losing its market portion to Bitcoin and other alternative coins.
According to renowned crypto analyst Max Price, Ethereum’s market influence and price trends, due to it being the only altcoin with its own spot ETH, could be influenced significantly by Exchange Traded Fund (ETF) inflows.
“follow the money id only think about moving into eth if etf inflows start to pick up.”
Currently, esteemed analyst The Great Martis is raising concerns as Ethereum’s price patterns suggest a “bearish trend,” potentially leading to a drop in value below the $1,000 mark.
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2024-11-04 17:55