Ethereum’s value has plummeted by 5% in the past 24 hours, with its price falling below $2,600. Market fears and growing supply are contributing to ether’s decline, but analysts point out that this could be a potential setup for a future price bounce.
Market Fears and Growing Supply Contribute to Ether’s 5% Decline
Ether (ETH) has experienced a significant decline in value over the past 24 hours, with its price falling below $2,600. This drop is part of a broader market downturn, with bitcoin (BTC) also experiencing a decrease of around 2.9% over the same period.
Ethereum's value is primarily derived from its cryptocurrency, Ether (ETH).
The price of ETH is influenced by supply and demand in the global cryptocurrency market.
As a decentralized platform for building smart contracts and decentralized applications, Ethereum's value also depends on the adoption rate and usage of its ecosystem.
According to CoinMarketCap, Ethereum's market capitalization has consistently ranked among the top three cryptocurrencies since 2017.
The total supply of Ether is capped at 100 million, which contributes to its scarcity and, subsequently, its value.
Growing Supply and Market Fears Contribute to Ether’s Decline
One factor contributing to ether’s underperformance is its circulating supply surpassing pre-Merge levels. The Ethereum Merge transitioned the network to a Proof-of-Stake (PoS) consensus mechanism, which was expected to help reduce the supply of ETH. However, since April, the trend has reversed due to the introduction of EIP-1559 in 2021, which reduces the supply of ETH by burning base fees on every transaction.
The Ethereum Merge is a significant update to the Ethereum network, transitioning from a proof-of-work (PoW) consensus algorithm to a proof-of-stake (PoS) mechanism.
This shift aims to improve scalability, security, and energy efficiency.
The Merge will combine the existing Beacon Chain with the mainnet, enabling validators to stake their Ether holdings instead of relying on energy-intensive mining.
The update is expected to reduce energy consumption by 99% and increase transaction processing capacity.
SEC Delay and Growing Supply Weigh on Ether’s Performance
The Securities and Exchange Commission (SEC) recently delayed its decision on listing options contracts for BlackRock’s iShares Ethereum Trust (ETHA), which could be weighing on the cryptocurrency’s performance. Additionally, other factors such as restrictions on the Ethereum Foundation and heightened competition from other networks like Solana have also been affecting ether.
The Ethereum Foundation is a Swiss-based non-profit organization established in 2014 by 'Vitalik Buterin.'
It aims to support and fund research and development of the Ethereum protocol and ecosystem.
The foundation has a global presence with team members from diverse backgrounds, working together to advance the Ethereum network's scalability, security, and usability.
With a strong focus on open-source and community-driven development, the Ethereum Foundation plays a crucial role in shaping the future of blockchain technology.
Potential Setup for a Price Bounce
Despite the bearish performance, analysts have pointed out that ether’s price is mirroring a pattern seen before a previous bullish run. This could potentially signal an upward move in the future. Strong over-the-counter demand for ETH has also been reported, which could lead to a surprise bounce once the market stabilizes.
Bearish Sentiment and Potential Setup
Analysts at Santiment have noted that there has been a drop in the amount of ETH tokens at a profit since they were first mined. This bearish sentiment could be a potential setup for a surprise bounce ‘once crypto markets are able to stabilize.
