Ethereum has had a bad year so far. Recent price drops have exasperated the situation. We discuss if now is the perfect time to open a long position or if Ethereum has had its day.
No cryptocurrency has had a good time over the last few months. Yet Ethereum seems to have fared worse than most. Now, with other investors pouring fuel on the fire, could Ethereum be oversold, and is now the time to make a move? Or is it time to look at other altcoins?
Recent Ethereum Price Changes
Ethereum has taken yet another dip in price, making it one of the worst years in history for the cryptocurrency. It has now tumbled for three consecutive weeks, losing half its value from its November peak. The Ethereum price today has just made a marginal rebound at the time of writing, moving to $1475 from $1399. While many are speculating about the demise of the currency, for others it is the perfect time to open a long position.
Understanding Ethereum’s recent decline is complex. The first factor to look at is the number of outflows from Ethereum spot ETFs. Comparisons between their net outflows compared to Bitcoin show that investors, in this case, those who may be more inclined to traditional investment methods, are still wary of Ethereum and more confident about Bitcoin.
There have also been concerns about a decline in fees. It once dominated the DeFi landscape and while it has raked in $227 million in network fees this year, it is low compared to the rivals that are hot on its heels. Tether alone has managed to net $1.3 billion and is not even one of the leading altcoins.
Declining Relationships with Ethereum and Bitcoin
Many media outlets this week have been awash with statistics regarding the declining relationship between Bitcoin and Ethereum. This is mainly because the rate has dropped to a five-year low, with the last rate of this kind being in 2019 when Bitcoin was at around $7,000 and Ether was at $125. At the time of writing, 10% has been lost in the value of Ethereum alone. This means it has wiped out seven years of gains.
The worry is that this is not just the result of macroeconomic trends either, but a problem within Ethereum itself. Web3 developers have noted that active addresses on the platform have not grown over the past four years. Thus, everything the blockchain promised is not being achieved as people don’t want it. This has resulted in the platform grinding to a halt in terms of growth. Inevitably, its native cryptocurrency has done the same.
Positive Signs for Ethereum
The above argument overlooks the fact that most activity has shifted to Ethereum Layer-2. As it grows, it just proves that the currency’s ecosystem is shifting away from its original plans. This just needs to connect with the price of Ether.
Not all is doom and gloom, and many believe that Ethereum is becoming oversold. Firstly, all risk assets took a hit in the past few weeks, not just Ethereum. This is evident in the fractal patterns seen in historical data from 2018 and 2022. With a consolidation phase and a bottom, a rebound could be imminent. All Ethereum needs is to convince institutional investors of its usefulness and turn their heads away from Bitcoin.
Ethereum vs Solana
With Ethereum looking grim, it is also seeing many investors turn to alternatives, one of which is Solana. The latter market cap is around 27% of the size of the former, suggesting it may have a lot more room for growth.
One factor Ether does have on its side over Solana is that the latter network is primarily used for stablecoins, of which the value is pegged to fiat currencies. While this may have previously been an advantage, it could now be Solana’s undoing. With a global economy in freefall, many of its major currencies may drop in value along with them. While Ethereum does have $125.2 billion in stablecoin values itself, it also has other strings to its bow.
There have also been voices that have joined the case for XRP eclipsing Ethereum as soon as 2028. This came from Standard Chartered, who believe its ability to perform cross-border payments is going to be a big asset in the coming years, increase confidence and make its value surge. The multinational bank also specifically highlights Ethereum as being one of the losers in the cycle, highlighting its demise even further. Ripple has also been making moves to increase the market presence of its cryptocurrency. This comes in the form of its acquisition of prime broker Hidden Road. It is hoped this will boost the liquidity of transactions made by XRP.
Yes, the future does not look good for Ethereum. However, the currency has bounced back before. With so many people pouring petrol on the flames, it is becoming hideously oversold. It is at these points that short-term gains can be made, and those who believe in Ethereum still, have long-term positions.