3 Metrics Signal Continued Ethereum (ETH) Price Decline

Following a surge that saw Ether (ETH) rise to $3,972 after the approval of spot Ethereum exchange-traded funds (ETFs), the cryptocurrency has underperformed in the past week, dropping by 10%. This decline has caused concern among traders who are unsure if the downturn has come to an end. To provide some perspective, Bitcoin’s (BTC) price dropped by 6% during the same period, and the total market cap for cryptocurrencies fell by 5.3%. Various market and technical indicators suggest that ETH might experience further correction before it can make any significant recovery attempt.

In the past week, the ETH/BTC ratio has also decreased, highlighting Ethereum’s underperformance relative to Bitcoin and other prominent layer 1 tokens. While BTC dropped by 5.5% over the week, the ETH/BTC ratio declined by 5.21% from 0.055 on June 3 to 0.0513 on June 11, reaching its lowest point since May 20. Several factors, notably specific to Bitcoin in 2024, have contributed to this underperformance of ETH.

One such factor is the success of U.S. spot Bitcoin ETFs, which have attracted nearly $2 billion in capital inflows in the past week alone. The impending Consumer Price Index (CPI) reading and Federal Open Market Committee (FOMC) meeting decision on potential rate cuts have led to significant market corrections in recent months, affecting prices across the crypto space, including Ethereum’s.

Ethereum’s network activity has seen a decline across multiple metrics over the last 90 days. Data from Glassnode shows that the daily active addresses on the Ethereum network dropped from 622,963 on March 20 to 458,400 on June 10. This decline included a 1.2% decrease over just 48 hours. While Ethereum still leads the layer 1 sector, Solana has made significant strides in gaining market share in terms of on-chain activity.

Data from DappRadar indicates that Ethereum’s NFT volume fell by 9% in the past seven days, shrinking to 105 million. Ethereum’s overall network activity trails behind Solana and the BNB Chain in terms of total Unique Active Wallets (UAWs). Over 524,000 UAWs interacted with the Ethereum protocol, a 4.5% decrease in the past week, which pales in comparison to the 2.7 million UAWs active on Solana, representing a 74% increase in the same period.

The decreasing on-chain activity is a strong indicator of declining demand for Ether within its ecosystem, which in turn exerts downward pressure on its price. On the upside, Ether now faces significant resistance, having lost a critical support level around the $3,500 demand zone, turning it into a resistance area. Historical price action shows that this zone presents a formidable barrier for ETH bulls. For instance, a drop below this level on April 11 resulted in a 25% fall to a low of $2,814 by May 2.

IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model emphasizes the importance of this resistance area, which is within the $3,476 to $3,577 price range where roughly 2.6 million addresses had previously purchased approximately 1.08 million ETH. If this resistance sees heightened seller activity in the short term, ETH’s price might decline even further.

Ether’s market setup indicates a continuation of its downtrend. After reaching a six-week high of $3,973 on May 27, the price pulled back as bears took profits and the broader market corrected. This pullback saw the price drop by 12% to the current level of $3,511. Despite a temporary recovery, the daily chart shows a long bearish candlestick, suggesting the ongoing intensity of the downtrend.

Ether bulls are relying on immediate support from the $3,400 psychological level. A daily close below this level would signal their inability to defend it, potentially projecting a decline to $2,840, which would represent an 18% drop from the current price. This precarious situation underscores the current volatility and uncertainty surrounding Ether’s market prospects.