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Highlights
- Ethereum price could shrink to $1500 if developmental and internal issues remain unresolved.
- U.S. spot Bitcoin ETFs have been more successful than Ethereum ETFs.
- Solana and Near beat Ethereum in terms of daily active users.
Ethereum price has witnessed a steady correction from $3977 to $2415— a 40% pullback within four months. Amid Metalpha’s $90M ETH sale, the recent upswing in ETH could spark another sell-the-bounce event from market participants to recuperate the bearish momentum. A prolonged correction looming for crypto holders hints at underlying issues affecting Ethereum that investors must be watchful.
Reasons Why Ethereum Price is Lagging
Ethereum is the most extensive blockchain network in terms of total value locked (TVL) and ecosystem protocols—however, despite this huge success, the price struggles to rise. Ethereum market cap has shrunk to $281 billion, while USD Tether (USDT) has swelled to $118 billion. It is only a matter of time before USDT displaces ETH as the second-largest crypto asset. But why is Ethereum lagging? Here are a few reasons:
- Sluggish on-chain metrics
- Layer 2 solutions are economically extractive and hold Ethereum back.
- Competitions from other blockchains.
- Spot Ethereum ETF outflows.
- Macroeconomic factors
Sluggish On-chain Metrics
ETH price has slowly fallen out of focus as on-chain metrics show a negative outlook for the network and coin price. According to YCharts, the current 30-day average ETH daily active addresses is 430,250, a 7% decrease from 90 days ago. In comparison, Ethereum hit 799,580 DAA in May 2021 during the height of the 2021 bull run.
This data suggests there are fewer users interacting with the Ethereum blockchain, which translates to a reduction in ETH transactions.
Layer 2 Solutions Leeching on Ethereum
The majority of Ethereum Layer 2 (L2) solutions are performing exemplarily well, sadly, at the expense of the mother chain. According to Founder and CIO of Cyber Capital Justin Bons, L2s are venture capital-funded centralized networks that siphon fees for Ethereum L1.
ETH Is Down Bad, While Layer 2s Are Ripping. Are L2s Parasitic to Ethereum?
💥 @Justin_Bons and @RyanBerckmans dive into a fierce debate:
🔥 Can Ethereum scale without losing to L2s?
🔻 Does the blockchain trilemma not exist anymore?
📉 Is Ethereum’s L1 stuck in the past?
👊 ETH… pic.twitter.com/6uNY5fIWWe— Laura Shin (@laurashin) September 10, 2024
Additionally, Ethereum Co-founder Vitalik Buterin has amped up pressure on L2s to decentralize further, saying he would stop mentioning L2s that haven’t been decentralized enough.
Competitions From Other Blockchains
In addition to other problems, the competition for the top spot as the leading DeFi chain has been fierce, with Solana coming in hot. Solana and Near Blockchain are beating Ethereum on some metrics by sheer numbers alone.
For instance, data from The Block shows Solana DAA surged to 5.9 million, while Near Blockchain registered 2.9 million DAA. Ethereum pails in comparison with only 475,000 DAA.
Spot Ethereum ETF Outflows
The U.S. spot Ethereum trading needs to be going according to expectations. Data from Soso Value shows the ETF saw a net negative flow of $20.14 million on September 12, bringing the cumulative total netflow to a negative $582.74 million.
In comparison, U.S. spot Bitcoin ETFs have been more successful since their approval on January 10, which has been reflected in Bitcoin price. Similarly, the net negative flows can be seen replicating on Ethereum price in its downward trajectory.
Macroeconomic Factors
Broader macroeconomic factors, such as potential interest rate cuts by the U.S Federal Reserve on September 18 and the concerns of a tech stock bubble driven by the recent slump in NVIDIA price, may have negatively affected investor sentiment and by extension, Ethereum price. These factors make or break a conducive environment where crypto asset prices thrive.
Can Ethereum Price Catch Up?
These issues collectively paint a challenging picture for Ethereum price, affecting its adoption and growth in a highly competitive and young market. Ethereum would have to first resolve the developmental and internal issues with its L2 chains before things change. Additionally, full-blown bull run could change Ethereum’s fate, resulting in higher prices.
Frequently Asked Questions (FAQs)
1. Why has the Ethereum price been struggling despite broader market movements?
2. What impact did Metalpha's $90M ETH sale have on Ethereum price?
3. Can Ethereum price recover in the future?
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