Ethereum Faces Steep Decline Amid Rising Competition
Ethereum’s price has plummeted by over 52% since its December peak. It’s now trading at $1,970, down from $4,105. This significant drop makes Ethereum one of the market’s worst-performing blue-chip coins.
Analysts at standard Chartered recently downgraded their Ethereum price estimate by 60%, from $10,000 to $4,000. They cite growing competition from layer-1 and layer-2 networks as the main reason for this decline.
Layer-2 networks like Coinbase’s Base, Arbitrum, and Optimism are attracting more users due to lower fees. For instance, DeFi Llama’s data shows that DEX Ethereum protocols handled over $9.8 billion in volume in the last seven days. Arbitrum and Base handled $2.87 billion and $2.8 billion, respectively.
Ethereum also faces competition from layer-1 networks like Solana and BNB Chain. BNB Smart chain’s DEX protocols handled over $13 billion in volume in the last seven days.
Developers may prefer other scalable and cheaper networks like Mantra and BNB Chain for emerging technologies like Real World Asset tokenization due to Ethereum’s higher fees and slower speed.
active addresses on Ethereum have declined in recent months.Santiment’s data shows that Ethereum had 461,000 active addresses on Wednesday, down from 717,000 earlier this year.
Ethereum’s realized cap HODL wave has also crashed to its lowest point since August last year, indicating that long-term holders are selling.
The daily chart shows a strong downward trend for Ethereum.The coin formed a triple-top pattern at $4,000, with the neckline at $2,120. A death cross pattern has also formed as the 50-day and 200-day moving averages crossed each other. This decline is due to concerns about its future.Layer-2 networks on Ethereum, such as Coinbase’s Base, Arbitrum, and Optimism, have gained more users because of their lower fees. For example,DeFi Llama’s data shows that DEX Ethereum protocols handled over $9.8 billion in volume in the last seven days. Arbitrum handled $2.87 billion, while Base had $2.8 billion. In the past,this volume would have been handled on Ethereum’s mainnet network.
Ethereum is also seeing intensified competition from layer-1 networks like Solana and BNB Chain.BNB Smart Chain’s DEX protocols handled DEX volume worth over $13 billion in the last seven days.
Ethereum is not expected to benefit from emerging technologies like Real World Asset tokenization because of its higher fees and slower speed. Developers may opt to use other scalable and cheaper networks like Mantra and BNB Chain.
More data shows that the number of active addresses on Ethereum has declined in the past few months. The chart below from Santiment shows that Ethereum had 461,000 active addresses on Wednesday, down from 717,000 earlier this year. The 365-day mean dollar invested age or MDIA,which calculates the duration that each coin has stayed in an address and all the money used to buy it,has dropped to its September lows.
The daily chart shows that the ETH price has been in a strong downward trend over the past few months.
Therefore, the coin will likely continue falling as sellers target the psychological point at $1,500, which is about 25% below the current level.
