Ethereum price dips by 25% over the past week. What happens next?
Ether has been hit especially hard by the recent cryptocurrency market downswing.
- If ETH continues on its downward ascent, the currency could once again slip below the all-important $1,200 resistance level.
- The total amount of Ether locked across the global DeFi landscape has decreased substantially, dropping by over 30% within the last couple of weeks.
- Signs of a market-wide bounce and scaling developments bring reasons to remain bullish
The crypto market has been ravaged by an overwhelming amount of bearish momentum over the past fortnight, with Ether, in particular, being on the receiving end of some massive downward momentum. In this regard, the premier altcoin dipped from an all-time high of $2,037 to $1,314 between Feb 20 and 28. That being said, during the last 24-hour trade cycle, the altcoin has regained some of its lost momentum, currently sitting at back above $1,500.
There are a couple of factors that seem to be in Ether’s favor at the moment. Firstly, ETH mining has been quite profitable over the course of the last week, with data clearly showing that Ethereum transaction fees have been able to sustain a 50+% share of the total block reward quota. Secondly, the currency’s network has continued to exhibit a high hash rate, with the metric touching a new ATH of 416,083.7354 GH/s recently.
This suggests that Ether mining has continued to be profitable for many miners, despite the dip.
It should also be mentioned that the amount of Ether held across centralized exchanges (CeFi) has continued to dip, with the number currently sitting at an all-time low, as more and more people continue to either liquidate their ETH or offload the coin into their own wallets.
The total value locked (TVL) across the DeFi ecosystem has been dipping over the last week, dropping from $44.90 billion to $33.9 billion over the course of the last 10 odd days. This is most likely a reflection of the declining prices. As the value of crypto-assets declines, so too do metrics like TVL.
Making sense of the situation
To get a better read of where the market may be heading and what the core reasons may be behind Ether’s ongoing slide, Paolo Ardoino, chief technical officer for cryptocurrency exchange Bitfinex, told Finder that we’ve been witnessing turbulence across all major cryptocurrencies this week, however, it appears as though the market may be showcasing a resurgent mood once again, adding:
“It is important to remember that Ethereum is still in its very early stages of development and it has not lost the loyalty of some of the ecosystem’s leading protagonists and developers. I wouldn’t speculate on the Ethereum price but as I’ve stated before, if one is bullish on crypto one can be bullish on Ethereum.”
Furthermore, in Ardoino’s view, it is necessary for crypto backers and enthusiasts to look beyond Ethereum’s daily price movements and remember the future goal of the protocol, i.e to support and enable billions of users to gain access to a fully decentralized financial ecosystem. “Ethereum is not alone in having to overcome the challenges latent within the deployment of decentralized ledger technologies”, he added.
Similarly, Pankaj Balani, CEO of cryptocurrency exchange Delta, told Finder that the recent dip in Ether’s price seems to have been primarily driven by a market-wide correction that does not accurately reflect investor sentiment currently surrounding Ethereum as well as its burgeoning ecosystem. He added:
“There were leveraged longs in the system on ETH and other Altcoins with the former being used as collateral. As the market slipped, these longs went into liquidation triggering a sharp dip in the prices. Ether remains one of the most sought-after assets despite concerns about rising gas fees etc.”
Balani also pointed out that the crypto sector is witnessing substantial interest from investors to build long-term long positions in Ethereum, both on the futures side and on the options side of things. In his view, while price action may be poor at the moment, it would not be surprising to see the second-largest cryptocurrency by total market capitalization scale up to the $3,000 mark by the end of the year.
Investors can remain optimistic about Ether’s future
Though the last few weeks have been quite turbulent for the crypto market as a whole, with Ether, in particular, being faced with a lot of bearish pressure, Nikita Ovchinnik, chief business development officer for 1inch, told Finder that for a large number of Ethereum users, the coin has already provided outstanding returns over the last few months and that the recent correction is just part of a healthy marketwide adjustment, adding:
“This adjustment still keeps users confident in the future of the ethereum ecosystem. Although, DeFi users will vastly benefit from cheap gas and therefore a cheaper price of ether will provide more opportunities for on-chain activity.”
On the subject of whether Ether can survive the current onslaught of projects exiting its ecosystem in favor of other blockchains, Ovchinnik opined that there is no doubt in his mind that Ethereum will not only rise back but also shine as the key infrastructure of the blockchain/cryptocurrency industry and beyond. “There are multiple on-chain scalability solutions like Optimism Rollups that will solve current struggles. Eth 2.0 is way closer than it looks like”, he added
Disclosure: The author owns a range of cryptocurrencies at the time of writing