Ether (Ethereum) ETH price drops to $3,234 Since trading above $4,000 on March 14, two months have passed since the U.S. Securities and Exchange Commission approved the Ethereum spot exchange-traded fund (ETF) on May 23. Traders are examining whether the bullish momentum has faded, and if not, what can drive the price to continue climbing above $4,000.
The launch of the spot Ethereum ETF is not ideal
Investors are less enthusiastic, in part because of the poor performance of the entire cryptocurrency market, which currently has a total market value of $2.42 trillion, down 16.5% from its peak of $2.82 trillion on March 14, 2024. The main factor contributing to this situation is that the Federal Reserve has successfully controlled inflation without causing a recession, thereby weakening the appeal of alternative assets.
However, Ethereum has its own problems. Its price has fallen 10% over the past two months relative to Bitcoin (BTC). Since July 23, net outflows from U.S. Ethereum spot ETFs have totaled $406 million, with most of the outflows concentrated in Grayscale’s products.
The total value locked (TVL) of the Ethereum network remains at 17.8 million ETH, the same as two months ago, indicating that the growth of the ecosystem may have stagnated. Some analysts believe that the high gas fees (over $1.8) in the past few months have promoted the development of its second-layer expansion solutions. However, according to L2Beat data, the TVL of these solutions has remained basically unchanged in the past two months at 12.9 million ETH.
If Ethereum wants to reclaim the $4,000 support level, it needs to attract more interest from institutional investors. This can be reflected by the trend of net inflows into US spot ETFs or at least by the cessation of outflows from the Grayscale ETHE fund. As institutional capital enters, traders will verify its ecological growth by monitoring the TVL of the ecosystem.
Although investors are skeptical about the growth of DApps deposits, this skepticism mainly stems from the huge inflows of funds from venture capital funds or projects before airdrops, but they failed to maintain the initial enthusiasm. Therefore, the growth of TVL should be consistent with the improvement of other on-chain indicators, such as the number of active addresses.
Ethereum TVL needs to grow and its roadmap must be addressed
While Ethereum fans claim that its project is far superior to competitors such as Solana, BNB Chain, and Tron in terms of decentralization, this argument is weaker when prominent investment firms choose to launch projects on other platforms. A recent example is that Hamilton Lane, a publicly traded U.S. asset management company, chose Solana’s Libre to launch a tokenized project.
More concerning is that Ethereum’s dominance among retail traders has been challenged recently. Thanks to the launch of the memecoin on Pump.fun, Solana’s market share on decentralized exchanges (DEX) reached 29.6% in July, surpassing Ethereum’s 28.1%, according to data from DefiLlama.
Finally, sustainable growth in Ethereum’s price relies on the implementation of its scalability improvements, including sharding technology and a clear timeline for miner extractable value (MEV) mitigation strategies. Proposed changes, such as Danksharding, aim to increase the current limit of one blob per block to 64, significantly improving data availability.
The upcoming Pectra fork is expected to introduce Verkle trees, reducing storage requirements and enhancing data accessibility. In addition, investors are also looking forward to the implementation of zero-knowledge SNARKs, which is expected to improve privacy and compress transaction data into concise proofs, thereby reducing the storage requirements of the blockchain.
The path to $4,000 by 2024 remains viable, but only if issues related to institutional adoption, scalability, and growth of the DApps ecosystem are properly addressed.
