Ethereum Price Set For Potential Breakout: Technical Analysis

TLDR

Ethereum price fell 7.3% between October 1 and 8, with underperforming altcoins Ethereum ETFs showing no net outflows on October 7 and $548M in outflows Ethereum's DEX volume dominance has dropped from 64% to 22% since the start of July. , Solana is now leading layer-2 solutions like Base are gaining a lot of interest in the Ethereum ecosystem, with Blackrock considering Ether as an “at-risk” asset comparable to stocks/venture capital.

Ethereum, the second-largest by market capitalization, is facing headwinds as its price and network activity stall.

Between October 1st and October 8th, the price of Ether fell by 7.3%, erasing the gains made in the previous two weeks. This decline mirrored activity in the broader altcoin market, suggesting that the decline is not unique to Ethereum.

Investor sentiment for Ethereum is mixed. Since September 1, Ether has decreased by 2% while the overall altcoin market value has increased by 4.5%.

This difference can be attributed in part to the underperformance of ether exchange-traded funds (ETFs) in the United States.

These ETFs saw no net inflows as of Oct. 7 and have experienced a combined $548 million in expenses since their launch in July, according to data from Farside Investors.

Competition from other blockchains has intensified, putting pressure on Ethereum's market dominance. Scaling-first networks such as Solana, BNB Chain, Tron, Avalanche and Sui accumulate $19.5 billion in total value locked (TVL), equivalent to 43% of Ethereum's $45.6 billion in deposits.

More significantly, Ethereum's decentralized foreign exchange (DEX) rate has dropped from 64 percent in January 2023 to 22 percent now, an area Solana leads.

However, when considering Layer-2 scaling solutions such as Base, Arbitrum, Polygon, and Optimism, Ethereum still holds the lead.

Base, in particular, has made significant strides with a 14 percent market share in seven months. Key projects in the core network are Aerodrome, which facilitated $2.93 billion in trade last week, and Uniswap, which saw $1.36 billion in trade during the same period.

While the Ethereum ecosystem has grown with layer-2 solutions, the number of transactions on the core network has remained relatively stagnant.

This lack of progress in network activity has led to some undesirable consequences. When there is less competition for processing power, Ether will become more expensive, as reduced demand for space and lower transaction fees reduce the incentive for validators to maintain the network.

In an unexpected development, BlackRock, one of the providers of Ether ETFs, recently emphasized that Ether's value proposition is compatible with “at-risk” assets.

This position contrasts with Bitcoin's dominant narrative as “digital gold,” placing Ethereum as a competitive competitor for equity and venture capital.

The context of the global economy adds another layer of complexity to Ethereum's outlook. Daniel Yergin, vice chairman of S&P Global, told CNBC that the global economy is entering a “dangerous period” with rising tensions in the Middle East and reduced oil demand from China.