Ethereum Price Slump: Is a Recovery Possible Amid Market Shifts?

Ethereum Price- What’s Behind the Struggling Network?

Ethereum Price– Ethereum (ETH) has been under pressure recently, with its price plunging 47% from its December peak of $4,105 to its current price of $1,990 as of March 21. Despite a growing trend of holders locking up their assets through staking and decentralized finance (DeFi), Ethereum’s performance in the market has been disappointing. Santiment’s March 21 analysis suggests that this decline is largely due to Ethereum’s decreasing exchange supply and the rise of Ethereum layer-2 networks, which offer lower transaction fees and are drawing users away from the mainnet.

Santiment’s analysis highlights a key shift in Ethereum’s market activity: Ethereum exchange supply has dropped by 16.4% over the past seven weeks, indicating a long-term accumulation trend. This suggests that more holders are staking their assets or holding them off exchanges instead of selling. Despite this, Ethereum’s price has not seen the same upward movement, indicating a disconnect between on-chain metrics and price action.

In addition to the decline in exchange supply, Ethereum (ETH) is facing increased competition from layer-2 networks, such as Arbitrum and Base. These networks offer significantly lower transaction fees, attracting more users and further decreasing the demand for Ethereum’s mainnet. According to DeFiLlama, Ethereum-based decentralized exchange (DEX) protocols processed $9.8 billion in volume last week, with $5.67 billion coming from Arbitrum and Base alone. This shift towards layer-2 networks has caused Ethereum’s mainnet activity to decline, which has had a direct impact on its fee revenue.

Ethereum’s fee revenue has dropped drastically from $218 million in December to just $46 million in February. This decline in revenue has raised concerns about the sustainability of Ethereum’s economic model. While Ethereum’s Dencun upgrade, which reduced gas fees by 95%, has lowered transaction costs, it has not been enough to reverse the overall downward trend.

Ethereum’s Total Value Locked (TVL) Takes a Hit

Another worrying sign for Ethereum (ETH) is its declining Total Value Locked (TVL). TVL represents the amount of cryptocurrency staked or locked in Ethereum (ETH)-based DeFi protocols, and it has dropped from $76 billion in December to $46 billion as of the latest data. This significant decrease in TVL reflects a broader decline in interest in Ethereum-based DeFi applications, further contributing to the pressure on the Ethereum network.

One potential source of support for Ethereum (ETH) could be the growing interest in Ethereum exchange-traded funds (ETFs). Both the New York Stock Exchange (NYSE) and the Chicago Board Options Exchange (CBOE) have filed requests with the U.S. Securities and Exchange Commission (SEC) to permit staking in Ethereum ETFs. However, despite the potential for more institutional involvement, Ethereum Spot ETFs have experienced $370 million in outflows over the past month, indicating that institutional interest in Ethereum remains relatively low at the moment.

On the technical side, Ethereum (ETH) continues to face resistance at the $2,042 level. The 50-day moving average is currently acting as a barrier, and the Bollinger Bands show low volatility, suggesting that the price is consolidating within a narrow range. Ethereum is recovering from oversold conditions, but the Relative Strength Index (RSI) is at 41.22, indicating a lack of strong momentum. While weak volume signals uncertainty among traders, a slight uptick in volume suggests that there may be some accumulation happening.

If Ethereum (ETH) manages to break through the $2,042 resistance level, the next targets for the price would be $2,163 and $2,370. However, if the price fails to hold the $1,986 level, there may be a decline toward the $1,714 mark, where previous buying interest has been seen. Given the current market conditions and ongoing challenges for Ethereum (ETH), its path forward remains uncertain, and further volatility can be expected in the near term.

In summary, while Ethereum (ETH) is undergoing a period of accumulation off exchanges, its price has not yet reflected these changes. The increasing popularity of layer-2 networks, declining fee revenue, and competition in the DeFi space all contribute to the ongoing challenges Ethereum faces. With institutional interest remaining low and resistance on the technical charts, Ethereum’s short-term outlook appears uncertain, and the cryptocurrency could continue to face downside pressure unless these trends reverse.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.