Ethereum (ETH), the world’s second-largest cryptocurrency by market capitalization, has been underperforming Bitcoin (BTC) and the broader crypto market in recent weeks. This has raised concerns among investors about the altcoin’s ability to stage a sustained recovery.
ETH Price Lags Behind
Following a 26% rally leading up to the launch of spot Ether exchange-traded funds (ETFs) in late July, ETH has fallen behind. Over the past month, ETH’s price has dipped 4.3%, while Bitcoin has gained 7.7%. This underperformance extends to other top-tier layer-1 tokens like Solana (SOL) and Cardano (ADA), which have seen significant gains in the same period.
Technical Indicators Signal Weakness
Several market and technical indicators suggest potential further downside for ETH before a true recovery. One key factor is the ETH/BTC ratio, which has dropped 14% since May despite a recent three-day uptick. This suggests that ETH is losing ground relative to Bitcoin.
Ethereum Network Activity Slowdown
Ethereum’s network activity has also declined recently. Daily active addresses (DAAs) on the network dropped from over 711,000 in June to around 426,000 in mid-July. This could indicate a decrease in user engagement or a shift in activity to other blockchain platforms.
Solana Steals Market Share
While Ethereum remains the dominant layer-1 network, Solana has been capturing market share in terms of on-chain activity and fees. Data shows that Solana has surpassed Ethereum in daily active addresses and daily transaction volume. This trend could further impact ETH’s network value proposition.
Spot Ether ETF Outflows Cast a Shadow
The launch of spot Ether ETFs presented a mixed picture. While they saw initial inflows of over $1.23 billion, these were countered by even larger net outflows from Grayscale’s converted ETHE product. The combined net outflow from spot Ether ETFs now sits at around $440 million, potentially dampening ETH’s price.
Resistance at $3,500
Technically, ETH’s recent attempt to climb above $3,500 was met with resistance, indicating a potential barrier to its recovery. Data suggests that a significant number of investors previously bought ETH around this price point, and they might be inclined to sell if the price reaches that level again.
Looking Ahead
The confluence of these factors creates uncertainty around Ethereum’s short-term price trajectory. If sellers become active at the $3,500 resistance zone, ETH could experience further decline. However, a successful break above this level could signal a potential reversal in its fortunes.
Investors should closely monitor network activity, developments within the competitive layer-1 landscape, and the overall market sentiment to make informed decisions about their ETH holdings.