Ether Faces Resistance at $2,700 Amid ETF Outflows, But Network Activity Fuels Bullish Momentum
ETH News – Ether surged by 16.2% on August 8 but struggled to maintain momentum above $2,600 on August 9. Despite encountering stronger-than-expected resistance at $2,700, Ether’s bullish trend remains intact, supported by a favorable macroeconomic environment and increased activity on the Ethereum network and its layer-2 solutions.
Are spot Ether ETF outflows hindering ETH’s performance?
Some analysts argue that outflows from spot Ether ETFs have weighed on ETH’s performance. However, this dynamic could shift as turnover from Grayscale’s ETHE product begins to slow. Historically, the fund has charged significantly higher fees compared to its peers, with many investors previously locked in due to restrictions on redemptions.
According to Ethereum educator Sassal, citing Farside Investors data, Grayscale’s ETHE saw its lowest-ever outflows on August 8, amounting to $20 million. This trend suggests that outflows may be nearing zero. Grayscale’s ETHE still holds $5 billion worth of Ether, indicating that while flows may stabilize, potential risks remain.
On a positive note, traditional finance investors are increasingly confident that the U.S. Federal Reserve (Fed) is poised to cut interest rates throughout 2024. Lower capital costs benefit risk markets by encouraging investment, as they reduce the appeal of fixed-income returns.
According to Bloomberg, Boston Fed President Susan Collins remarked, “The economy is growing at a pace that I think should preserve that solid labor market.” She further added that inflation is trending back toward the Fed’s 2% target, leading to a potential shift toward less restrictive monetary policy.
Ethereum network data signals bullish momentum
Beyond macroeconomic factors, the Ethereum network has made significant advancements, driving demand for Ether and reducing its inflation rate as more ETH is burned due to growing competition for blockchain space. This bullish momentum is also reflected in a 55% increase in decentralized application (DApp) activity on Ethereum over the past week.
The surge in Ethereum’s activity was primarily driven by Uniswap, the leading decentralized exchange (DEX), followed by 1inch Network and CoW Swap. Other notable contributors include Curve, Instadapp, and Morpho Optimizers. Ethereum’s dominance in the DEX sector remains unmatched, with $21 billion in volume over the past seven days, far outpacing Solana’s $14.4 billion, according to DefiLlama data.
Further underscoring Ethereum’s success is its total value locked (TVL), which reached 19.7 million ETH, the highest level since November 2022, reflecting a 9.4% increase from the previous month. This growth has been driven by platforms such as Aave, Zircuit Staking, Curve Finance, Magpie Ecosystem, and Mellow Protocol, as reported by DefiLlama. In contrast, BNB Chain’s TVL has remained stable at around 8.7 million BNB over the past month.
Ethereum layer-2 solutions reach new heights
While some critics argue that Ethereum’s average transaction fees of $3.85 limit its adoption, they overlook the significant role of its second-layer scaling solutions. Solutions like Base, Arbitrum, Blast, Optimism, and Mantle collectively account for $11.7 billion in native TVL, or $36.7 billion when including bridge deposits, according to L2Beat data.
In fact, activity on Ethereum layer-2 solutions nearly hit an all-time high on August 7, with an average of 318 transactions per second, driven by the growth of networks like Xai, Base, and Proof of Play, as reported by L2Beat. These layer-2 solutions now handle 24 times more transactions than the Ethereum base chain, highlighting the effectiveness of recent upgrades aimed at reducing the operational costs of rollups.
With the Ethereum network strengthening in both activity and deposits, Ether appears well-positioned to reclaim the $3,000 level in the near term, provided there are no significant external shocks to investor sentiment.
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