Despite gaining around 35% in 2023, Ethereum’s native token, Ether (ETH), has consistently failed to decisively retake the $2,000 mark. This resistance level has proven to be a strong barrier, with multiple bearish rejections hindering its progress. This situation mirrors the bearish rejection experienced in 2018-2019 near $425, suggesting that Ethereum is currently in a similar recovery phase. Both instances share the commonality of Ether’s recovery attempts being limited by the 0.236 Fib line of the Fibonacci retracement graph.
Ethereum’s inability to surpass $2,000 can be partly attributed to a strengthening U.S. dollar, which has dampened demand for the cryptocurrency in recent months. The negative correlation between major cryptocurrencies and the dollar has been a significant factor in this trend. Throughout 2023, the weekly correlation coefficient between Ether and the U.S. dollar index (DXY) has consistently been negative. Thus, the prevailing market conditions have placed downward pressure on Ethereum’s price, making it challenging to break above $2,000.
Ethereum has also underperformed in comparison to Bitcoin, primarily due to the hype surrounding the spot Bitcoin ETF. The ETH/BTC pair, a widely-tracked indicator of Ethereum’s performance against Bitcoin, has experienced a 20% decline year-to-date (YTD). Additionally, Ethereum-tied investment funds have witnessed a significant drop of $114 million in 2023, while Bitcoin-based funds have attracted $168 million in the same period.
Declining Total Value Locked and Reduced Yields
The total-value-locked (TVL) across the Ethereum ecosystem has plummeted from 18.41 million ETH to 12.79 million ETH in 2023. This reduction in available funds has resulted in lower yields for investors, a situation that has been cautioned by JP Morgan analysts. Moreover, the decline in TVL has coincided with a drop in Ethereum network’s gas fees, reaching a yearly low on October 5th. Additionally, Ethereum’s NFT volumes and unique active wallets have experienced declines of 30% and 16.5% respectively over the past 30 days. Even popular applications such as decentralized exchange Uniswap V2, DEX aggregator 1inch Network, and Ethereum staking provider Lido have witnessed decreases in key metrics.
Technically, Ethereum’s price may see a potential rebound towards its 50-day exponential moving average (50-day EMA) located around $1,665. However, the overall price pattern indicates a bearish continuation pattern known as an ascending triangle. A break below the triangle’s lower trendline could trigger a significant price crash, potentially leading to a drop to $1,465 and $1,560 in October 2023, depending on the breakdown point. Conversely, if there is a break above the 50-day EMA, Ethereum’s price may rise towards the upper trendline of the triangle, near $1,730, coinciding with the 200-day EMA.
Ethereum faces several challenges in its quest to surpass the $2,000 mark in 2023. The psychological resistance, coupled with a strengthening U.S. dollar, has hindered its progress. Underperformance compared to Bitcoin, reduced investment capital, declining TVL, and lower yields further add to the hurdles. Additionally, technical indicators suggest the possibility of a bearish continuation pattern, which could lead to a substantial price drop. However, a rebound towards the 50-day EMA remains a plausible scenario. Overall, Ethereum’s price surge above $2,000 requires overcoming these obstacles and regaining market confidence.
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