3 Reasons Why Ether Price is Still Below $1,900

Ether’s price has been consolidating in a narrow range between $1,800 and $1,900 since July 21. This lack of volatility has left investors uncertain about the direction of the market, despite positive developments such as the launch of PayPal’s Ethereum-based stablecoin and the increasing demand for Ether-based exchange-traded funds (ETFs).

While PayPal’s entry into the world of cryptocurrencies is seen as a step towards mainstream adoption for Ethereum, it has also raised concerns about centralization and the potential loss of control over personal assets. Additionally, the growing number of applications for Ether ETFs to the United States Securities and Exchange Commission reflects a trend of asset management firms seeking to establish Bitcoin ETFs.

1. Decrease in DApp Deposits and Active Users

One concerning factor for the Ethereum network is the high gas fees, which are transaction costs, including those executed with smart contracts. The average transaction fee has been over $4 for the past two months, limiting the demand for decentralized applications (DApps).

There has been a noticeable decline in the total value locked (TVL) of deposits on the Ethereum network, reaching the lowest level in three years according to DefiLlama. The number of Ether deposits has decreased by around 12.9 million compared to three months ago. To assess the decline in the network’s TVL, it is important to monitor the utilization of DApps. However, certain DApps such as gaming platforms and marketplaces do not require substantial deposits.

Moreover, the number of active addresses using DApps has dropped by 25% in the last 30 days. This decline suggests that investors are dissatisfied with the high transaction costs on the Ethereum network.

2. Balanced Demand between Bulls and Bears in Derivatives

Ether quarterly futures are popular among large investors and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are demanding more money to delay settlement. In healthy markets, ETH futures contracts should trade at a 5 to 10% annualized premium, known as contango.

Based on the futures premium or basis indicator, professional traders in the Ether market have maintained a neutral-to-bearish stance since July 16. The current premium level of 5% indicates an equilibrium in demand between leveraged long and short positions.

The unveiling of Coinbase’s Base network on August 9 could further challenge Ether’s ability to surpass the $1,900 mark. Several development teams have announced their offerings for the Base network, which includes a version of the decentralized exchange Uniswap. Additionally, Ethereum faces competition from other smart contract platforms and challengers with abundant resources, adding uncertainty to the resilience of the $1,800 support level.

3. Conclusion

While positive developments such as PayPal’s entry into cryptocurrencies and the increasing demand for Ether-based ETFs point towards a bullish outlook for Ethereum, there are factors holding back the price from surpassing $1,900. The decrease in DApp deposits and active users, along with the balanced demand between bulls and bears in derivatives, contribute to the current price range.

Investors should consider the impact of transaction costs on the Ethereum network and monitor the utilization of DApps to assess the sentiment towards the cryptocurrency. Additionally, the competitive landscape and the launch of new platforms like Coinbase’s Base network add to the uncertainty surrounding Ether’s price movement.

This article is for general information purposes and should not be taken as legal or investment advice. The views and opinions expressed here are the author’s alone and do not necessarily reflect the views and opinions of Cointelegraph.

Editor’s Notes

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