Ether, the native cryptocurrency of the Ethereum network, has experienced a significant surge in price recently. Between March 10 and March 18, Ether’s price jumped by 31.3%, reaching a daily closing price of over $1,600. This surge coincided with the Federal Reserve’s intervention to address the Silicon Valley Bank’s insolvency with a $300 billion injection. However, concerns are now emerging about Ether’s ability to sustain this support level.
The cryptocurrency market has been facing various challenges and negative developments over the past six months. One prominent issue is the financial struggles of Digital Currency Group (DCG), the parent company of Grayscale mutual fund manager. There are worries that a portion of the $4.8 billion worth of ETH deposits in the Grayscale Ethereum Trust might be liquidated to address DCG’s debts.
Furthermore, two major players in the crypto exchange arena, Binance and Coinbase, are involved in legal disputes with the United States Securities and Exchange Commission (SEC). This has added to the bearish sentiment prevailing in the cryptocurrency sphere.
In addition, the initial excitement surrounding futures-based Ether exchange-traded funds (ETFs) has diminished, as these instruments do not involve actual ETH coins.
On-chain metrics within the Ethereum network also reflect a stagnation in demand. The number of Ethereum addresses holding at least $1,000 worth of ETH deposits is at its lowest level in nearly six months. Additionally, Ethereum’s average transaction fee has remained above $4 for the past six months, contributing to a decline in investor interest.
Moreover, data on decentralized application (DApp) activity on the Ethereum network shows a lack of new users. All sectors, including cryptocurrency games, decentralized exchanges, non-fungible token marketplaces, and Web3 services, have seen a decline in active users.
These challenges and declining metrics have raised concerns about Ethereum’s ability to sustain its price surge. Without an increase in network activity and catalysts for a price recovery, such as network upgrades and cost reduction, Ether’s price may dip below the $1,600 support level.
Recent developments, such as Visa integrating Solana blockchain settlement capabilities and Coinbase assisting partners with converting old USDC versions, have disappointed Ethereum enthusiasts. The overall bearish sentiment in the cryptocurrency market and dwindling interest in cryptocurrencies according to Google Trends data further contribute to the likelihood of Ether’s price facing downward pressure.
In conclusion, despite Ether’s recent price surge, there are growing concerns about its ability to sustain this level. Various challenges, including financial struggles within the industry, legal disputes, declining on-chain metrics, and disappointing developments, raise doubts about the future of Ether’s price. Investors and enthusiasts will be closely watching to see how Ethereum addresses these challenges and if catalysts for a price recovery emerge.
