Ethereum price has held steady in the past few weeks. ETH was trading at $1,615 on Sunday, a point it has remained for about two weeks. Its performance has been worse against other cryptocurrencies like Bitcoin and Solana. The ETH/BTC pair moved to 0.018, its lowest level since 2019, while ETH/SOL has crashed to a record low.
Why Ethereum price has crashed
There are several reasons why Ethereum price has imploded in the past few years. First, there are signs that Wall Street investors are not enthusiastic about ETH ETFs as evidenced by the inflows metrics. Data shows that spot Ethereum ETFs have had net outflows in the last eight consecutive weeks.
All Ethereum ETFs have just $5.27 billion in assets, much lower than what the Grayscale Ethereum Trust had before the conversion. Blackrock’s ETHA has $1.87 billion in assets, while Grayscale’s ETHE and ETH have $1.85 billion and $721 million, respectively. The other large ETH ETFs are by Fidelity, Bitwise, and VanEck.
A possible reason for all this is that investors in these ETFs don’t receive any staking fee. As such, Ethereum fans prefer buying and staking ETH to avoid the ETF fee and make a monthly staking return.
Second, Ethereum Foundation, which oversees the network, has come under criticism in the past few months. It has dumped ETH tokens and gone through management issues. Just recently, the foundation named a new leadership team as it seeks to reposition the network for the future.
Read more: Ethereum price prediction: short-term volatility amid long-term bullish signals
Layer-2 networks growth
Third, Ethereum continues to face significant competition from layer-2 networks on the network. Layer-2 are independent chains that run on top of Ethereum’s chain. They supercharge its performance by ensuring that it has superior transaction speeds and low costs.
These chains have become highly popular in the crypto industry. For example, Base has attracted 496 developers, while the total value locked (TVL) has jumped to over $3.7 billion. Its total bridged assets are over $10.6 billion, while the stablecoin market cap is $4.1 billion.
Arbitrum has become a top layer-2 network with over 795 DeFi applications, $2.6 billion in assets, and $10.5 billion in bridged assets. It has a stablecoin market cap of over $2.86 billion.
The risk for Ethereum is that these chains are capturing market share and taking fees that it should be taking.
One implication of all this is that Ethereum is no longer the most profitable chain in the crypto industry. It has made just $235 million in fees this year, while Tether has made $1.5 billion so far. Justin Sun’s Tron has made over $992 million this year.
Read more: Ethereum set for a major price comeback in 6 months and 1 year, should investors buy the dip?
Ethereum price technical analysis
ETH price chart | Source: TradingView
Fundamentals suggest a further decline in the ETH price this year. To some extent, trend-following principles suggest that the price of Ethereum will continue falling as it remains below all moving averages.
On the positive side, however, is that Ethereum price has formed a falling wedge pattern, a popular bullish sign in technical analysis. The two lines of this pattern are nearing their confluence, signaling that a bullish breakout is about to happen. If this happens, the next point to watch will be at $2,140, up by 33% from the current level.
A drop below the key support at $1,385, its lowest level this year, will invalidate the bullish view and point to further declines.
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