Ethereum Faces Potential Decline Amid DeFi Contraction and Technical Weakness

Ethereum (ETH) has recently encountered significant challenges, with analysts predicting further price declines and a notable contraction in its decentralized finance (DeFi) ecosystem.

Ethereum is currently trading at about $1,923, which is a 27% drop from a month ago. Three times throughout this cycle, Ethereum has failed to break through the $4,000 resistance level, according to technical analysts.

Prices are currently trading below important trendline support as a result of the market structure becoming weaker due to the recurrent inability to overcome vital resistance. Experts warn of a possible drop to $1,060 if Ethereum is unable to recover the $2,500 support level. Furthermore, there is no verified bullish divergence on weekly charts, suggesting that the ETH/BTC ratio is still in a bearish trend and continues to be weak in comparison to Bitcoin.

Over the past 30 days, Ethereum’s DeFi ecosystem has experienced a substantial contraction, shedding $29 billion in total value locked (TVL). This decline underscores a broader market trend where investors are reallocating assets amid prevailing economic uncertainties. Concurrently, the BTC/ETH ratio has reached all-time highs, with Bitcoin extending its lead over Ethereum by 30% in just three weeks. This shift suggests a growing preference for Bitcoin over Ethereum among investors, potentially due to Bitcoin’s perceived status as a more stable store of value during volatile periods.

Ethereum’s current consolidation below the $2,000 resistance level reflects investor caution ahead of impending economic events, such as the U.S. Federal Reserve’s interest rate decision. The contraction in Ethereum’s DeFi ecosystem and the rising BTC/ETH ratio highlight a shifting landscape in the cryptocurrency market. Investors are advised to monitor these developments closely, as they may have significant implications for Ethereum’s price trajectory and the broader crypto market dynamics.

ABOUT THE AUTHOR See More

Sophia Cruz

Financial Writer - Asian & European Desks

Sophia is an experienced writer, reporter and newsdesk member, mostly on the financial sectors. For the past 5 years Sophia has covered a wide variety of topics such as the financial markets, economics, technology, fin-tech and trading. Sophia has been a part of the FX Leaders team since 2017 and works on producing valuable content and information for traders of all levels of experience.

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