Ethereum Price Drops 12% in 2 Days – Are Investors Losing Reasons to Hold ETH?

Ether (ETH) price fell 12% between October 1st and October 3rd, failing to break above the $2,650 resistance level. This bearish momentum has wiped out all gains from the past two weeks, destroying the optimism that followed the breach of the $3,000 support level two months ago.

Traders are now asking whether Ether can recover to $2,800 and what conditions are necessary for ETH to reverse the current trend and further boost the broader cryptocurrency market.

Although the price of Ether has decreased by 5% since September 1, the total cryptocurrency market capitalization has increased by 1.4%.

In particular, the much-anticipated launch of the Ether exchange-traded fund (ETF) in the United States in July has disappointed investors, with net outflows totaling $552 million since inception, according to data from Farside Investors. However, this is not the only cause of Ether's decline, but rather the result of declining investor appetite.

Some attribute Ether's price weakness to constant selling pressure from Vitalik Buterin and the Ethereum Foundation, while others cite a general decline in demand for decentralized applications and cryptocurrencies. Whatever the reason, several factors have kept Ether's price below $2,800.

Many Ethereum fans had high hopes, assuming that Ether would fail based on the concept of “ultrasound money”. However, this has not materialized in the past five months, as coinage rates have turned positive, primarily due to changes to reduce Layer-2 package costs. Basically, Ethereum's strategic adjustments have had a negative impact on the price of Ether.

Vitalik Buterin, the founder and CEO of Ethereum, believes that special data storage areas (blob space) need optimization. In a September 28 blog post, he proposed reducing the maximum block size from the current 2.7 megabytes to 1 megabyte. This update is intended to facilitate more balanced use of Layer-2 networks.

In addition to the increasingly complex Ethereum roadmap, traders have seen Ethereum ICO participants load up to 31,000 ETH in the past month after being held back since mid-2014. According to onchain analytics platform Lookonchain, this entity received 150,000 ETH during the initial offering of Ether.

Similarly, Vitalik Buterin transferred about $10 million worth of Ether to wallets connected to cryptocurrency exchanges in August to support various projects in the Ethereum ecosystem. At the same time, the Ethereum Foundation has transferred more than $207 million to crypto exchanges, which is said to be aimed at supporting and expanding the Ethereum ecosystem.

The movement of the Ethereum network does not indicate a further decrease in the price of ETH.

However, based on data from the Ethereum network, investors have no reason to believe that the price of Ether will underperform relative to broader market trends. Ether's core functionality derives from its decentralized processing capabilities, as proven by robust metrics such as the total value invested in the network's smart contracts and the total volume of decentralized applications (DApps).

In particular, Ethereum remains the market leader with a turnover of 26.2 billion dollars. More importantly, it has seen a 27% increase in the number of active addresses and a 41% increase in business transactions over the past seven days. In comparison, BNB Chain (BNB) showed a 15% decrease in users compared to last week, while the TON network showed a 35% decrease in active addresses.

Related: Ethereum traders are pricing in ‘extreme moves' ahead of US election.

Highlights on the Ethereum network include a 33% increase in transaction volume for Uniswap and a 122% increase in Balancer volumes, reaching $5.4 billion in seven days. In addition, Curve generated 143% higher volumes, resulting in significant growth in user engagement and transaction activity. In terms of active addresses, EigenLayer stood out with 114% growth in one week, while Ethereum's numbers nearly quadrupled.

Ultimately, Ether's path to regaining $2,800 seems to depend on the decentralized application movement, which is more dependent on balancing robustness and scalability as an incentive for ETH investors. This includes maintaining returns from stock or increasing demand for tier-2 processing fees.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.