Yesterday’s crypto market turbulence led to Ethereum (ETH) encountering the $4,000 resistance level for the third time since March 2024. Currently, this second-largest cryptocurrency by reported market cap is trading around $3,400, reflecting a 6.7% decline over the past 24 hours.
What’s Driving Ethereum’s Lackluster Performance?
Despite posting a commendable 47% year-to-date (YTD) gain, Ethereum has lagged behind other major cryptocurrencies such as Bitcoin (BTC), Solana (SOL), and XRP, which have enjoyed significantly higher returns during the same timeframe. Several factors seem to be restraining Ethereum’s price movement.
One reason is Ethereum’s comparatively weaker brand recognition than Bitcoin. This was particularly evident with the unremarkable market reaction to the launch of spot ETH exchange-traded funds (ETFs) in August, which failed to spark any notable price increase. Recent data reveals a stark gap in investor interest; U.S. spot ETH ETFs boast $11.98 billion in total net assets, while spot BTC ETFs hold around $109.66 billion—almost ten times more.
Adding to this, over $60 million flowed out of spot ETH ETFs yesterday, marking the most significant one-day outflow since November 19. Crypto analyst Ali Martinez pointed out that social sentiment surrounding ETH has hit its lowest in a year. Yet, historically, such a dip could present a surprisingly optimistic buying opportunity for Ethereum.
Furthermore, futures traders are becoming increasingly bearish on ETH. The aggregated premium for futures positions has turned negative for the first time since November 6. The recent market downturn triggered Ethereum’s most significant liquidation event since December 9, amounting to a staggering $299 million liquidated in just a day. Such widespread liquidations can often lead to further sell-offs and increased price fluctuations.
Another ongoing concern is the Ethereum Foundation’s practice of selling ETH close to local price peaks. In a recent post on X, Lookonchain revealed that the Foundation sold 100 ETH on December 17, followed by a 17% drop in ETH’s price.
Skepticism also looms over Ethereum’s supply issuance. A recent report from Binance Research raised questions about ETH’s relatively high issuance rate, challenging its narrative as “ultrasound money,” which suggests that Ethereum functions as a deflationary asset.
Is Ethereum Poised for a Recovery?
Prominent crypto analyst @Trader_XO mentioned they purchased spot ETH at the $3,200 price point yesterday. They anticipate a period of price consolidation lasting a few weeks before ETH’s next upward movement.
In another analysis, crypto trader @CryptoShadowOff spotted a potential ascending triangle formation on ETH’s monthly chart. They indicated that ETH might drop further to around the $2,800 range before aiming for a new all-time high (ATH).
Market analyst @CryptoBullet1 pointed out that on the 4-hour chart, ETH has not been this oversold since August 5, suggesting that a price rebound may be imminent. As of this writing, ETH stands at $3,400, down 6% in the last 24 hours.
With a mix of challenges and the potential for recovery, the future looks intriguing for Ethereum. Will it overcome the $4,000 resistance or face further trials? Only time will tell.
