Ethereum (ETH) is currently facing a significant challenge with regards to its on-chain activity. One of the key factors affecting ETH performance is the declining total transaction fees on the Ethereum network. This decline can be mainly attributed to lower fees following the Dencun upgrade. Additionally, the relative transaction count on the network has also seen a dramatic drop, falling from a record high of 27 in June 2021 to just 11, one of the lowest levels since July 2020. This decrease in on-chain activity is a cause for concern among investors and traders, as it indicates a weakening network dynamics compared to Bitcoin.
Another critical factor impacting Ethereum’s struggle is the shrinking institutional interest in the cryptocurrency. Ethereum has failed to attract the same level of institutional investment as Bitcoin, leading to a lack of support from major financial players. The underwhelming performance of Ethereum ETFs compared to Bitcoin is a clear indicator of this trend. The relative spot trading volume of ETH to Bitcoin has also seen a significant drop, from 1.6 to 0.76 in the past week. This preference for Bitcoin over Ethereum among traders and investors is a significant hurdle that ETH needs to overcome in order to regain momentum.
Ethereum’s supply dynamics are not supportive of a price increase at the moment. Since early April, the total supply of ETH has steadily grown following the Dencun upgrade. Currently, the total supply stands at 120.323 million ETH, the highest level since May 2023. This increase in supply, coupled with the declining on-chain activity and shrinking institutional interest, adds to the challenges that Ethereum is currently facing. The lack of support for a price increase could further contribute to ETH’s underperformance compared to Bitcoin in the near future.
Ethereum (ETH) is currently trading at $2,262 after a significant 23% drop from its local highs. Volatility and uncertainty continue to drive the market as ETH tests local demand near its yearly lows of around $2,200. The cryptocurrency remains below its 4-hour 200 moving average (MA) at $2,565, a critical indicator of market strength. In order for bulls to regain control, it is essential for the price to break above this moving average and challenge the local highs at $2,600. However, failure to hold support at the yearly low of $2,200 could signal the start of a bear market for Ethereum.
Ethereum’s struggle can be attributed to a combination of factors, including declining on-chain activity, shrinking institutional interest, and supply dynamics not supportive of a price increase. The underperformance of Ethereum compared to Bitcoin is a cause for concern among investors and traders, as it indicates a lack of momentum for the cryptocurrency. To prevent further underperformance and potential bearish territory, bulls need to regain control and challenge key levels to support ETH’s short-term recovery.