Ethereum, the second-largest cryptocurrency by market capitalization, has recently displayed signs of changing market sentiment and momentum, as noted in an analysis conducted by CryptoQuant analyst Percival.
The analyst pointed out that various market dynamics and technological advancements have influenced Ethereum’s momentum, resulting in diverse perspectives regarding its future growth outlook.
Related Reading
Ethereum’s Market Experiences Change
Percival emphasized that Ethereum has encountered a decrease in activity due to the emergence of other blockchains that offer greater accessibility, enhanced technology, and quicker update cycles.
According to the analyst, “the positive Momentum sentiment is significantly below expectations.” Currently, the open interest in Ethereum futures—a measure of capital inflow into derivative contracts—stands at $9.2 billion, with a notable influx of $2.12 billion recorded in August 2024.
This reflects a 30% increase, but is meager compared to the $6 billion inflow noted between April and May, representing only half of the prior momentum.
Another significant insight from the analysis is the “Coinbase Premium Gap,” which denotes the price difference of Ethereum on Coinbase compared to other global platforms.
A reduction in selling pressure from US investors hints at a potential positive shift in market sentiment. Nevertheless, the market remains in anticipation of a substantial influx of capital to facilitate a robust rally for Ethereum.
The analyst indicated that any upcoming price recovery will rely heavily on significant investment inflows, which are currently not forthcoming.
Additionally, following the announcements from the Federal Open Market Committee (FOMC), Ethereum’s gas fees spiked, suggesting a potential movement of capital from traditional treasuries into decentralized finance (DeFi).
The analyst pointed out an example: the DeFi lending platform Aave, which functions on the ETH network, has seen a slight increase in fee collection, from $42 million in March to $43 million in August.
Ethereum Network Falls Behind
While Percival noted that economically, Ethereum needs to revert to its maximum fee pass gas mean to align its growth with its intrinsic value, the analyst also suggests that the network currently faces several internal deficiencies.
Although the technological ecosystem surrounding Ethereum continues to expand, the network appears to be trailing behind its competitors, according to Percival. The CryptoQuant analyst reveals that this gap between Ethereum’s capabilities and its tech rivals has resulted in a significant decrease in investment.
Furthermore, the scarcity of small capital inflows and the lack of consistent usage imply that even minimal investments are not being maintained over time.
Related Reading
The analyst’s perspective is further bolstered by the fact that Ethereum’s network has encountered increased competition from alternative blockchains such as Solana, Binance Smart Chain, and others that offer superior transaction speeds and lower fees.
This has, to a degree, diverted interest and investment away from Ethereum towards these emerging ecosystems.
Featured image created with DALL-E, Chart from TradingView
Dutch
English
French
German
Greek
Italian
Portuguese
Russian
Spanish