Ethereum (ETH) is currently encountering considerable selling pressure and anxiety, having experienced a 23% downturn that has pushed its price down to annual lows of $2,200. A significant worry for investors is Ethereum’s continued underperformance relative to Bitcoin, a trend that has been observed since September 2022. During this period, Ethereum has decreased by 44% against Bitcoin.
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This sharp decline has prompted investors and traders to question the underlying reasons for Ethereum’s difficulties. A recent report from CryptoQuant provides some insights, highlighting several elements that could be impacting ETH’s performance. As market enthusiasts keep a close watch on ETH’s movements, many are anxious to determine whether the asset can regain its upward momentum or if further declines are imminent in the weeks ahead.
Ethereum Exposed: CryptoQuant Report Sheds Light
The latest report from CryptoQuant clarifies some of the factors currently affecting Ethereum (ETH). Declining on-chain activity, diminishing institutional interest, and the lackluster performance of Ethereum ETFs relative to Bitcoin stand out as key factors in Ethereum’s struggles, with the ETH/BTC ratio now at 0.0425, marking its lowest point since April 2021.
Ethereum’s underwhelming performance appears to be linked to weakened network activity compared to Bitcoin. For example, Ethereum’s total transaction fees have shown a declining trend, primarily due to reduced fees following the Dencun upgrade. The transaction count has also seen a notable decrease, plummeting from a record high of 27 in June 2021 to 11, one of the lowest marks since July 2020.
Furthermore, Ethereum’s supply dynamics are not conducive to a price rally. Since early April, the overall supply of ETH has steadily increased following the Dencun upgrade. Currently, the supply stands at 120.323 million ETH, the highest since May 2023.
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Additionally, traders and investors have shown a clear preference for Bitcoin over Ethereum, as the relative spot trading volume between ETH and Bitcoin has decreased from 1.6 to 0.76 in the past week. Historically, Ethereum’s price tends to rise relative to Bitcoin when its trading volume exceeds that of Bitcoin.
Given these dynamics, Ethereum may continue to lag behind Bitcoin for the foreseeable future.
ETH Price Action
Ethereum (ETH) is currently trading at $2,262 following a substantial 23% decrease from its recent highs. Market volatility and uncertainty are prevailing as ETH tests local demand near its annual lows around $2,200.
The cryptocurrency is presently trading well below its 4-hour 200 moving average (MA) at $2,565, which is a vital indicator typically associated with market strength. For bullish market sentiment to take hold, it is critical for the price to breach this moving average and test local highs around $2,600.
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However, should Ethereum fail to sustain support at its annual low of $2,200, the price could likely enter a deeper corrective phase, possibly indicating the onset of a bear market. This level is crucial for ETH’s short-term rebound, as a loss could trigger additional selling pressure. Bulls must reclaim these key levels to avoid Ethereum slipping into extended bearish territory.
Featured image from Dall-E, chart from TradingView
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