Despite a 35% growth in ETH, the native token of Ethereum, since the beginning of 2023, it has struggled to breach the psychological resistance level at $2,000. This situation is reminiscent of the refusal to dip below $425 from 2018 to 2019.
In both cases, Ethereum appears to be in a recovery phase while closing above the 0.236 Fibonacci retracement level on the chart. From 2018 to 2019, the 0.236 Fib level was around $425 and acted as a barrier to Ethereum’s recovery efforts. In 2023, a similar level is around $2,000, which has become a selling zone, putting downward pressure on Ethereum’s price.
The strengthening of the US dollar has reduced demand for Ethereum in recent months, making it challenging for Ethereum to close above $2,000. A common negative correlation exists between the leading cryptocurrencies and the US Dollar Index (DXY). In 2023, the weekly correlation coefficient between Ethereum and the DXY has consistently remained negative.
Additionally, Ethereum has been less effective than Bitcoin in 2023 due to the hype surrounding the immediate implementation of a Bitcoin ETF. For instance, the widely watched ETH/BTC pair has fallen by 20% since the beginning of the year.
Moreover, Ethereum-related investment funds have experienced a net outflow of $114 million as of 2023, according to CoinShares’ weekly report. In comparison, Bitcoin-based funds have attracted $168 million during the same period.
The total value locked (TVL) across the entire Ethereum ecosystem has decreased from 18.41 million ETH to 12.79 million ETH by 2023. This indicates a diminishing pool of available capital, leading to lower profits for investors, as recently cautioned by JP Morgan analysts.
TVL reduction has resulted in lower Ethereum gas fees, reaching yearly lows on October 5th. According to DappRadar, NFT volume and unique wallets activity on Ethereum have also decreased by 30% and 16.5%, respectively, in the last 30 days. This includes a decline in key metrics for popular applications such as decentralized exchange Uniswap v2, aggregator DEX 1inch, Ethereum staking service Lido, and others.
On a technical price analysis note, Ethereum has the potential to recover towards the 50-day EMA at around $1,665 in the short term. However, zooming out, ETH/USD is forming a descending triangle pattern, and breaking below the lower trendline of the triangle could trigger a price drop. In this case, Ethereum’s price could drop to around $1,465 and $1,560 in October 2023, depending on the analysis point.
In the short term, breaking above the 50-day EMA could drive Ethereum’s price towards the upper trendline of the triangle, around $1,730 in October 2023, aligning with the 200-day EMA.