Ethereum, a key player in the cryptocurrency market, is grappling to regain its $1,900 mark, in what can be seen as a struggle against weakened DeFi metrics and a surge in competition.
The dip in Ethereum’s health can be traced back to a decrease in liquidity and investor engagement. The total value locked in the network took a tumble from $63 billion in January to $44 billion in February, as per data from DefiLlama. The data also reveals a slowing down of stablecoin inflows, suggesting a sluggish capital rotation into Ethereum (ETH) protocols.
The overall trading volumes of decentralized exchanges have also seen a downturn, from $92 billion in December to $82 billion in February. Meanwhile, rising stars like Hyperliquid (HYPE) and Solana (SOL) have been registering increased perpetual futures trading volumes, putting further pressure on Ethereum, whose futures trading dropped from $31 billion in December to $18 billion in February.
Ethereum’s revenue, too, is feeling the heat, with a significant drop from $193 million in December to a mere $26 million in February. This drastic decline can be attributed to falling transaction fees and low network activity.
Along similar lines, spot Ether ETFs have experienced consecutive withdrawals for four weeks, totaling $176 million in the past month, as per data from SoSoValue. This implies a waning institutional demand for Ethereum.
Currently, Ethereum is trading at $1,876, battling to hold onto the critical support level of $1,875. With Ethereum consistently trading below its 50-day moving average of $2,282.50, the daily charts depict a clear downward trend, accentuating the bearish momentum.
The Bollinger Bands indicate a higher volatility with Ethereum clinging to the bottom band, hinting at oversold conditions. The relative strength index stands at 34.51, inching close to the oversold threshold of 30, indicating weak buying pressure but also signaling the possibility of a relief rally if demand increases.
However, the low trading volume points to poor market participation, suggesting that Ethereum could slide towards $1,800 if it fails to hold the $1,875 level; while a reversal would face resistance at $2,282. For a bullish shift to materialize, Ethereum needs to reclaim its 50-day moving average, but the price movement continues to be under stress.
One promising development to watch is the move to incorporate staking in Ether ETFs. Cboe BZX has submitted a request to U.S. regulators to allow staking in Fidelity’s Ether ETF, following a similar request from 21Shares in February. If given the green light, investors could reap around 3.3% in staking rewards, potentially drawing more institutional interest.
