Ethereum Price Struggles Below $2,000 as Supply Hits Decade-Low
Ethereum (ETH) is currently trading at approximately $1,980, struggling to maintain the critical $2,000 support level despite on-chain metrics showing historically low exchange supply. The ETH/USD price represents a decline of over 1.75% in the past 24 hours and continues a troubling trend for the second-largest cryptocurrency by market capitalization.
With approximately 8.97 million ETH now on exchanges, analysis of Santiment released on March 21 shows that Ethereum’s supply has plunged to its lowest level since November 2015. Usually a positive indication pointing toward long-term accumulation rather than selling pressure, this shows a significant 16.4% drop in exchange supply over the past seven weeks.
Institutional Interest Wanes: ETH ETFs Experience Consecutive Outflows
Ethereum has missed opportunity to profit from what would normally be considered optimistic market conditions despite the supply constraint. ETH is among the worst-performing major cryptocurrencies over this era since falling almost 47% to its present level from reaching its last top in December.
Data from Farside Investors shows among the larger market slump ETH exchange-traded funds (ETFs) have seen withdrawals for 11 straight days. Investors withdrew a total $73.6 million from ETH ETFs on March 13, choosing less erratic substitutes including cash, government securities, and dollar-pegged stablecoins, hence creating the largest notable single-day outflow.
As of March 20, Total ETH ETF holdings are about $7 billion; cumulative inflows since launch total $2.5 billion. But the latest outflow pattern of about $358 million over the previous 11 days points to declining institutional interest in the asset.
Layer-2 Networks “Drain” Ethereum’s Revenue Model
The growing predominance of layer-2 scaling solutions seems to be a main reason Ethereum underperformance occurs. Designed to increase Ethereum’s scalability by processing transactions off the main chain, these networks—whose cheaper fees and faster processing times appeal—have grown rather popular.
DeFiLlama data shows that Arbitrum and Base alone handled $5.67 billion out of the $9.8 billion in distributed exchange (DEX) volume handled by Ethereum-based protocols last week. Ethereum’s fee income has dropped from $218 million in December to just $46 million in February thanks in large part to this movement in activity away from the mainnet.
With projections of even less traffic in March, monthly DEX volume on Ethereum has also dropped from $92 billion in December to $82 billion in February. Ethereum’s base layer income suffered a reported 99% decrease by September 2024 following the Dencun update in March 2024, which dropped gas prices for layer-2 networks by 95%.
Ether Staking ETFs: A Possible Engine of Recovery
Approval of staking in exchange-traded funds could provide Ethereum’s price with some life. Inquiring requests to the U.S. Securities and Exchange Commission allowing staking in Ethereum ETFs have been made by both the Chicago Board Options Exchange and the New York Stock Exchange.
BlackRock’s head of digital assets, Robbie Mitchnick, spoke at the Digital Asset Summit on March 20. He said the Ether ETF is “tremendous success” but noted it is “less perfect” without staking capabilities. “A staking yield is a meaningful part of how you might generate investment return in this space,” Mitchnick said.
Staked Ether’s current yield rate varies yearly between 2% and 7%. Staking in ETFs offers difficult issues, too, including the possibility of reducing penalties should validators act in misbehavior, therefore discouraging regular investors.
ETH/USD Technical Analysis: Key Levels to Watch
Ethereum’s current price action places it at a critical juncture according to multiple technical analysts. The $2,000 level represents a crucial battleground that bulls have struggled to reclaim since March 10.
According to analyst Jelle, “ETH is about to put in a massive reclaim or it’s about to jump off a cliff.” If bulls can maintain strength above the $2,000 mark, a push toward $2,300 and potentially higher could follow. However, failure to hold this level could trigger another leg down, with the next major support sitting around $1,750.
The Continuous Linked Settlement (CLS) indicator analyzed by David Perk on TradingView suggests Ethereum could target its monthly CLS of $2,055 before potentially rallying above $2,600. Meanwhile, analyst Marzell has identified a bullish Falling Wedge pattern breakout, projecting a possible surge to $2,821, representing a 41.69% increase from the breakout level of approximately $1,991.
Ethereum Price Forecast and Future Outlook
Speaking at the Digital Asset Summit, Ethereum co-founder Joseph Lubin indicated that the story of Ethereum for institutional investors is “too big to describe” and likened it to “trying to describe the internet protocols and the web protocols.”
Promoting Ethereum to investors as a bet on tokenization, stablecoin acceptance, and distributed finance, BlackRock has When trying to explain Ethereum to institutional investors, Mitchnick observed, it’s simpler to present at a “second-grade level” as a “technology innovation story” than explore its more nuanced features.
Although Standard Chartered analysts recently dropped their ETH price prediction by year-end from $10,000 to $4,000 citing more competition from other networks, the immediate future for Ethereum remains unknown. Whether the second-largest cryptocurrency can overcome its present difficulties and restore its former glory will probably depend on more general acceptance of layer-2 solutions, possible legislative developments concerning ETF staking, and its capacity to sustain vital price support levels in the near future.
ABOUT THE AUTHOR
See More
Sidebar rates
Related Posts
Save
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals