Why is Ethereum (ETH) price down today?
Ether price is down today, trading below a key support level and threatening to revisit cycle lows.
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Market Update
Since Jan. 12, Ether (ETH) price has dropped by 13% from $2,719 and the notable development here is the breach of the $2,400 support level. This leads some traders to fear a revisit to the $2,000 level, but what do on-chain and technical analysis data suggest?
ETH price falls below a key support zone
The first interim bearish outlook for Ether ironically is in the demand area, which independent analyst Ali said was a strong support zone for Ether.
Ali said Ether enjoyed robust support from “a key demand zone, ranging between $2,388 and $2,460” and that if it “holds strong, there’s a clear path ahead with minimal resistance, offering a potential for upward movement.
The significance of this level is shown by Ether’s price action on the daily timeframe. The last time the price dropped below this level was in May 2022, when Ether sank 63% and traded below $1,000.
Notably, Ether slid below the demand zone earlier on Monday, Jan. 22, suggesting a major drawback in the making. The first major line of defense could emerge from the $2,000 level – embraced by the 200-day exponential moving average.
Ethereum network TVL rises while unique active wallets fall
Total value locked (TVL) is a metric commonly used to examine the health and demand of proof-of-stake (PoS) blockchains like Ethereum.
The Ethereum ecosystem TVL reached a 19-month high on Jan. 11 of $34.7 billion before sharply declining to $32.2 billion on Jan. 22.
Ethereum TVL is down 3.1% over the last 7 days, signaling decreasing demand for the blockchain.
In addition, nine of the top 10 Ethereum decentralized applications (DApps) have witnessed a 7-day decline. Notably, Instadapp and Compound Finance saw a respective 11% and 9.6% decrease in their TVL.
To determine whether the decline in Ethereum’s TVL correlates with a decline in its user base, it is important to monitor the utilization of DApps. Investors should note that certain DApps, such as gaming platforms and marketplaces, do not require substantial deposits.
The number of active addresses using DApps is down, which is a point of concern. In the last 30 days, the main DApps on Ethereum had 22.65% fewer unique active wallets (UAW). This might reflect dissatisfaction with the cost of transacting on the network.
Ether traders have negative expectations
Market analysts are showing pessimistic perspectives in regard to Ether’s shorter and medium-term price performance. While looking at technical price aspects of Ether’s movement, independent analyst Limbo posted a chart showing the price of Ether below $2,400 suggesting that ETH is a short trade.
On the other hand, crypto blogger Market Profit highlighted the downward potential for Ethereum by pointing to bearish sentiment in the market.
Investors’ appetite for Ethereum could continue to diminish if the downturn in the broader crypto market continues. The constant GBTC-linked selling of BTC at Coinbase could continue impacting the whole market, bringing crypto prices down.
On the upside, the eventual increase in the use of Ethereum-based protocols and the potential of a spot Ether ETF may prove to be a long-term catalyst for price growth.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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