Ethereum’s ascent to the revered $2,000 mark has been a watchword for many in the financial sector. Yet, every time it seems on the verge of breaking past this psychological threshold, it’s repelled back with unnerving consistency.
If you’re pondering the forces at play that prevent Ethereum from making that crucial leap, you’re not alone. Let’s delve into the core reasons tethering this cryptocurrency giant below its full potential.
A Reflection of the Past: Bearish Cycle Patterns
It’s eerily reminiscent, the manner in which Ethereum grapples with the $2,000 barricade today. Cast your mind back to the 2018-2019 period when the crypto’s upward trajectory halted near the $425 mark. Like a recurring nightmare, Ethereum finds itself in a seemingly parallel situation.
Eying a bullish surge past its 0.236 Fibonacci retracement, Ethereum, in both instances, was met with strong resistance – previously at $425 and now, unsurprisingly, around the $2,000 range. A barrier solidified further by traders’ anticipation and reactions.
Few can underestimate the influence of the world’s reserve currency, the U.S. dollar, on global assets. Ethereum is no exception. With a strengthening U.S. dollar, the appetite for Ethereum has undeniably waned.
The evident negative correlation between major cryptocurrencies and the dollar has long been established. In 2023, this correlation with the dollar index, specifically for Ethereum, has been palpably negative.
Yet, the dollar isn’t the sole heavyweight influencing Ethereum’s price trajectory. Bitcoin, often seen as the crypto market’s guiding star, has overshadowed Ethereum throughout 2023.
With the widespread chatter and excitement surrounding potential spot Bitcoin ETFs, Ethereum has paled in comparison. To paint a picture, the ETH/BTC pair, a commonly referenced metric, has dwindled by 20% this year.
Moreover, if we’re delving into numbers, Ethereum-focused investment funds have seen a net loss of $114 million in capital in 2023. In stark contrast, Bitcoin-centric funds experienced an influx of $168 million during the same timeframe.
Waning Activity on the Ethereum Network
When gauging the health and vibrancy of a cryptocurrency, one often examines the network activity. Ethereum, in this regard, paints a somber picture.
The year 2023 witnessed the total-value-locked (TVL) across the Ethereum realm recede from 18.41 million ETH to a mere 12.79 million ETH.
This translates to less liquidity and consequently, dwindling yields for investors – a sentiment echoed by industry bigwigs like JP Morgan.
A further testament to this declining vigor is the noticeable drop in Ethereum’s gas fees, which, as of October 5, plunged to an annual low.
Diving into specifics, Ethereum’s Non-Fungible Token (NFT) volumes and unique wallet activity have registered dips of 30% and 16.5%, respectively, over the last month.
Despite its current woes, the technical outlook for Ethereum offers a glimmer of hope. There’s potential for a bounce-back, aiming for its 50-day exponential moving average, hovering around the $1,665 mark.
However, a broader perspective shows Ethereum tracing a bearish continuation pattern. Should it breach the triangle’s lower trendline, we could be looking at a dip towards the $1,465 to $1,560 range in October 2023.
Conversely, a surge past the 50-day EMA could pave the way for an ascent to the triangle’s upper echelons, approximated at $1,730 for October 2023.
In essence, while Ethereum’s consistent brushes with the $2,000 mark remain frustrating for many, understanding the factors at play can equip traders and enthusiasts to navigate these tumultuous waters with a clearer perspective.
