According to Cointelegraph, Ethereum's native token, Ether (ETH), has gained around 35% in 2023 but has faced strong bearish rejections multiple times when attempting to break above the $2,000 psychological resistance level. There are three likely reasons for Ethereum's failure to decisively retake $2,000 since May 2022.
Firstly, Ethereum's inability to cross above $2,000 in 2023 resembles the bearish rejection near $425 in 2018-2019. In both cases, Ether appears to be in a recovery phase while eying close above its 0.236 Fib line of the Fibonacci retracement graph. In 2023, the same line is near $2,000, enforcing itself again as a selling area and pressuring ETH's price lower.
Secondly, a strengthening U.S. dollar has dampened demand for Ethereum in recent months, reducing its ability to close decisively above $2,000. The prevailing negative correlation between top cryptocurrencies and the dollar has been the main culprit. In 2023, the weekly correlation coefficient between Ether and the U.S. dollar index (DXY) has been consistently negative. Meanwhile, Ethereum has largely underperformed Bitcoin in 2023 due to the ongoing spot Bitcoin ETF hype. The net capital held by Ethereum-tied investment funds has dropped by $114 million so far in 2023, while Bitcoin-based funds have attracted $168 million in the same period.
Lastly, the total-value-locked (TVL) across the Ethereum ecosystem has dropped from 18.41 million ETH to 12.79 million ETH so far in 2023, underscoring a reduced availability of funds and resulting in lower yields for investors. The declining TVL has accompanied a drop in the Ethereum network's gas fees, which reached a yearly low on Oct. 5. Ethereum's NFT volumes and unique active wallets have also dropped by 30% and 16.5% in the last 30 days, according to Dapp Radar.
