The price of ethereum‘s native token, Ether (eth), has gained around 35% in 2023 so far. But its attempts to break above $2,000, a psychological resistance level, have witnessed strong bearish rejections on multiple occasions.
Cointelegraph takes a closer look at the three likely reasons why ethereum price has failed to decisively regain $2,000 since May 2022.
ethereum price paints a fractal of the bearish cycle
ethereum‘s inability to break above $2,000 in 2023 resembles the bearish rejection near $425 from 2018 to 2019.
In both cases, Ether appears to be in a recovery phase as it looks near its 0.236 Fib line of the Fibonacci retracement chart.
From 2018 to 2019, the 0.236 Fib line was near $425 and was instrumental in limiting Ether recovery attempts. In 2023, the same line will be close to $2,000, which will again impose itself as a selling area and therefore put downward pressure on the price of eth.
Strongest US dollar, bitcoin
The strengthening US dollar has dampened demand for ethereum in recent months, thereby reducing its ability to decisively close above $2,000.
The predominant negative correlation between major cryptocurrencies and the dollar has been the main culprit. In 2023, in particular, the weekly correlation coefficient between Ether and the US Dollar Index (DXY) has been consistently negative, as shown below.
Meanwhile, ethereum has greatly underperformed bitcoin in 2023 due to the continued spot hype over bitcoin ETFs. For example, the widely followed eth/btc pair is down 20% so far this year.
Additionally, the net capital of ethereum-linked investment funds has dropped by $114 million so far in 2023. according to the weekly CoinShares report. In comparison, bitcoin-based funds have attracted $168 million in the same period.
Related: It’s time to ‘put the brakes on’ ethereum and get back to bitcoin: K33 report
ethereum network activity drops
The total value locked (TVL) across the ethereum ecosystem has fallen from 18.41 million eth to 12.79 million eth so far in 2023. That underscores a reduced availability of funds., which will translate into lower returns for investors, as JP Morgan analysts also recently warned.
The drop in TVL has been accompanied by a drop in ethereum network gas fees, which hit a yearly low on October 5.
ethereum?src=hash&ref_src=twsrc%5Etfw”>#ethereumThe network has been particularly cheap to use, and this week’s average rate level of $1.13 is the lowest since November 2022. While not a perfect sign by any means, a lower level $eth The costs generally lead to an increase in profit and a rebound in prices. https://t.co/ymXFwGJh49 pic.twitter.com/PEGpXMmZ3q
– Sentiment (@santimentfeed) October 4, 2023
nft volumes and unique ethereum active wallets have also fallen by 30% and 16.5% in the last 30 days. according to DappRadar.
That includes drops in key metrics for popular apps, including decentralized exchange Uniswap v2, DEX aggregator 1inch Network, ethereum staking provider Lido and others.
ethereum technical analysis
Meanwhile, ethereum price technical data shows a potential bounce towards its 50-day exponential moving average (50-day EMA; the red wave) near $1,665.
However, generally speaking, eth/USD has been suffering from a bearish continuation pattern called an ascending triangle.
As a result, a break below the triangle’s lower trend line risks sending the price down to the pattern’s high. In this case, the price of eth may fall to $1,465 and $1,560 in October 2023, depending on the breakout point.
In the short term, a break above the 50-day EMA could see eth price rise towards the upper trend line of the triangle near $1,730 in October 2023, coinciding with the 200-day EMA (the blue wave ).
This article does not contain investment advice or recommendations. Every investment and trading move involves risks, and readers should conduct their own research when making a decision.
