Ether’s Price Plunge: A 5% Dip in 24 Hours
Ether (ETH) has witnessed a notable decline, dropping over 5.1% in the last 24 hours, falling below the $2,600 mark. In contrast, Bitcoin (BTC) has also faced a downturn, decreasing approximately 2.9% to around $95,700 during the same timeframe. This significant dip in ether’s value has contributed to a nearly 4% decline in the CoinDesk 20 Index, reflecting a broader market downturn that coincided with U.S. President Donald Trump’s announcement of upcoming reciprocal tariffs, heightening fears of a potential trade war with key trading partners.
Factors Behind Ether’s Underperformance
The recent decline in ether’s price can be attributed to several macroeconomic and specific factors impacting the cryptocurrency market. One of the primary influences is the increase in ether’s circulating supply, which has recently surpassed levels seen before the Ethereum Merge. This Merge, which transitioned Ethereum to a Proof-of-Stake (PoS) consensus mechanism by integrating with the Beacon Chain, was anticipated to decrease the supply of ether, at least temporarily.
However, since April, following the much-anticipated “Dencun” upgrade, this trend has reversed. This upgrade has effectively suppressed the growth of layer-2 networks by reducing their data fees and introducing transaction “blobs,” which facilitate lower transaction costs.
The Impact of Transaction Fees on Ether Supply
The reduction in transaction fees on the Ethereum network has led to a decrease in the burning of ether—a process implemented by the EIP-1559 upgrade in 2021 that burns a portion of the base fee from every transaction, thereby helping to limit the overall supply of ETH. As a result of this decrease in burned ether, the circulating supply of ETH has surged by 8,242 ETH since the Merge, according to data from Ultrasound.money.
Regulatory Concerns and Competitive Pressures
Adding to the downward pressure on ether’s price, the Securities and Exchange Commission (SEC) recently postponed its decision regarding the listing of options contracts for BlackRock’s iShares Ethereum Trust (ETHA). This uncertainty in regulatory matters could be influencing investor sentiment and contributing to ether’s underperformance.
Furthermore, the Ethereum Foundation is facing restrictions, coupled with intensified competition from other blockchain networks, particularly Solana. This competitive landscape has caused ether’s value relative to Bitcoin to drop to levels not seen since 2021. In a recent research report, JPMorgan highlighted that ether lacks a compelling narrative, in stark contrast to Bitcoin’s strong positioning in the market.
Potential for Recovery Amidst Bearish Sentiment
Despite the current bearish performance, analysts have noted that ether’s price trajectory resembles patterns observed in the past, which were often followed by renewed bullish momentum. Jake Ostrovskis, an OTC trader at crypto market maker Wintermute, mentioned that there is “strong over-the-counter demand for ETH,” indicating a potential interest from investors even in a declining market.
Moreover, analysts from Santiment have recognized a decrease in the number of ETH tokens held at a profit since their mining, suggesting that bearish sentiment may create an opportunity for a surprising rebound once the cryptocurrency markets stabilize.
In conclusion, while ether is currently experiencing a downturn driven by a combination of increased supply, regulatory concerns, and fierce competition, there are signs that the market could turn in favor of ether in the near future.
