Due to the cryptocurrency market crash yesterday, Ethereum (ETH) has faced rejection at the critical $4,000 resistance level three times since March 2024. The second-largest cryptocurrency by market capitalization is currently trading at $3,400, down 6.7% in the past 24 hours.
What is the reason for Ethereum's poor price performance?
Although ETH has seen a substantial increase year-to-date (YTD), reaching 47%, its growth has been surpassed by other major cryptocurrencies such as Bitcoin (BTC), Solana (SOL), and XRP, which have shown significantly higher gains during the same period. Several factors seem to hinder Ethereum's price momentum.
One factor is that Ethereum's brand recognition is relatively weak compared to Bitcoin. The lukewarm response to the spot ETH exchange-traded fund (ETF) launched in August underscores this. The launch of these ETFs failed to bring any meaningful price changes to ETH.
Data further reveals a significant disparity in investor interest between these two assets. Currently, the total net assets held by the U.S. spot ETH ETF are $11.98 billion. In contrast, the assets held by the spot BTC ETF are $109.66 billion, nearly ten times that of the latter.
Moreover, the outflow of funds from the spot ETH ETF exceeded $60 million yesterday, marking the largest single-day outflow since November 19. Cryptocurrency analyst Ali Martinez pointed out that social sentiment around ETH has reached a one-year low. However, based on historical trends, this might instead indicate a bullish opportunity for Ethereum.
Futures traders have also begun to turn bearish on ETH as the overall premium on futures positions has turned negative for the first time since November 6. The market downturn triggered the largest liquidation event for Ethereum since December 9, with $299 million liquidated in a single day. Such massive liquidations often lead to cascading sell-offs and increased price volatility.
Another recurring concern stems from the Ethereum Foundation's tendency to sell ETH near local price peaks. In a recent X post, Lookonchain pointed out that the Ethereum Foundation sold 100 ETH on December 17. Following this sale, the price of ETH dropped by approximately 17%.
The issuance of Ethereum's supply has also raised further doubts. A recent report from Binance Research highlighted that ETH's relatively high issuance rate has raised questions about its 'ultrasound money' claim, which suggests that Ethereum is a deflationary asset.
Will Ethereum rebound?
Experienced cryptocurrency analyst @Trader_XO stated that they bought spot ETH at $3,200 yesterday. The analyst added that they expect the price to undergo 'several weeks' of consolidation before ETH enters the next round of upward movement.
Meanwhile, cryptocurrency trader @CryptoShadowOff has identified a potential ascending triangle on ETH's monthly chart. According to their analysis, ETH may further drop to the $2,800 range before reaching a new all-time high (ATH).
Market analyst @ryptoBullet1 emphasized that ETH has never been this oversold on the 4-hour chart since August 5, indicating that a rebound may be imminent. As of the time of writing, ETH is trading at $3,400, down 6% in the past 24 hours.
