The cryptocurrency market has been weakening over the past few weeks, marked by sharp declines in major assets such as Ethereum and Bitcoin.
Ethereum (ETH) in particular appears to be struggling with a downtrend, leading many crypto analysts to predict further declines for the second-largest cryptocurrency by market capitalization.
Ethereum risks falling to $2,500
According to crypto research firm 10X Research, ETH is likely to drop to $2,500 due to its weakening fundamentals. They note Ethereum's inconsistent performance in the current market cycle, far from its role as a catalyst for price increases in previous cycles.
The firm highlights the impact Ethereum has had on Bitcoin growth this cycle, highlighting the strong correlation between the two, with an R-squared of 95%. Ethereum's declining fundamentals are seen as a barrier to money flowing into the cryptocurrency ecosystem, thereby hindering Bitcoin's growth.
“Ethereum: the number 2 token in the world continues to disappoint from both a fundamental and technical perspective. Its daily chart shows clear weakness. If the $2,950 level is broken, it will fall quickly to the 2500-2600 area,” said Daniel Yan, founder and CIO at Kryptanium Capital.
Ethereum Price Analysis | Source: 10x Research
Meanwhile, the bearish price forecast could stem from a drop in network activity, causing average transaction fees to record lows. According to blockchain analytics platform IntoTheBlock, the majority of transactions are now settled on Ethereum's Layer 2, with the three largest L2s accounting for a record 82% of all Ethereum transactions last month.
This coincides with developments regarding spot Ether ETFs. On May 10, ArkInvest and 21Shares amended their spot Ethereum ETF proposal by removing staking.
Bloomberg ETF analyst Eric Balchunas said the change could be aimed at refining the documents based on the SEC's response, although there was no comment on it.
“While it appears they are finalizing their documents based on SEC comments (which would be good news), there are no comments. So either this move is a welcome one or they are trying to eliminate things that the SEC could rely on to deny approval of a spot ETH ETF.”
Chances of ETH ETF approval | Source: Polymarket
Even so, the amendment increased the likelihood of approval of Polymarket's spot Ethereum ETF, an on-chain prediction protocol. Data on the website indicates that the chances of approval nearly doubled to 14% as of May 10 following the applicant's move.
However, approval expectations remain low due to the SEC's cautious stance towards Ethereum ETF applications.
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