Ethereum’s Value Could Decrease by 25% Because of Negative On-Chain Data
The price of Ethereum has plummeted by over 52% from its peak in December, with technical indicators and on-chain metrics hinting at further declines in the short term.
Ethereum (ETH) reached a high of $4,105 in December, but it was trading at $1,970 on March 20. This significant drop of 52% marks it as one of the worst-performing blue-chip cryptocurrencies in the market.
Concerns regarding Ethereum’s future are mounting. This week, analysts from Standard Chartered slashed their price forecast by 60%, lowering it from $10,000 to $4,000, due to increasing competition from layer-1 and layer-2 networks that have impacted its revenue growth.
Layer-2 solutions on Ethereum, such as Coinbase’s Base, Arbitrum, and Optimism, have attracted more users to their platforms because of their reduced fees. For instance, DeFi Llama’s statistics reveal that decentralized exchange (DEX) protocols on Ethereum recorded over $9.8 billion in volume in the past week.
Arbitrum processed $2.87 billion, while Base accounted for $2.8 billion. Previously, such volumes would have been managed on Ethereum’s mainnet.
Additionally, Ethereum faces heightened competition from layer-1 networks like Solana (SOL) and BNB Chain. BNB Smart Chain’s DEX protocols reported a trading volume exceeding $13 billion in the last week.
Ethereum is also expected to miss out on emerging trends like Real World Asset tokenization due to its higher fees and slower transaction speeds. Developers may prefer more scalable and economical networks like Mantra (OM) and BNB Chain instead.
Weak On-Chain Metrics for Ethereum
Recent data indicates a decline in the number of active addresses on Ethereum over the last few months. The following chart from Santiment illustrates that there were 461,000 active addresses on Wednesday, down from 717,000 earlier this year.
Another significant metric is Ethereum’s realized cap HODL wave, depicted in blue. It has dropped to its lowest level since August of last year, indicating that long-term holders are beginning to sell off their assets.
The 365-day mean dollar invested age (MDIA), which reflects the time each coin has spent in an address and the total investment used to acquire it, has fallen to its September lows.
Technical Analysis of Ethereum’s Price
The daily price chart indicates that ETH has been on a pronounced downward trend for several months. This decline was triggered after the formation of a triple-top pattern at $4,000, with the neckline at $2,120.
Ether subsequently exhibited a death cross pattern when the 50-day moving average crossed below the 200-day moving average, a common occurrence that typically signifies further bearish momentum. Additionally, popular oscillators such as the Relative Strength Index and Percentage Price Oscillator have shown declines.
As a result, it is likely that the coin will continue to face downward pressure, with sellers eyeing the psychological barrier at $1,500, approximately 25% below the current trading level.