Ethereum (ETH) has faced multiple obstacles in its attempts to break the $3,900 resistance level, despite several ventures above this mark in recent weeks. Analysts have identified three primary reasons behind this persistent stagnation.
1. Delayed Ethereum Spot ETF Approval: The anticipation of a spot Ethereum exchange-traded fund (ETF) approval by the U.S. Securities and Exchange Commission (SEC) had initially driven bullish sentiment. However, the delay in the actual trading of these ETFs has caused uncertainty. Notably, Bloomberg analysts expect trading to commence by July 4, but any further delays or significant outflows from the Grayscale Ethereum Trust (ETHE) could offset potential gains. These delays and investor hesitations contribute to the downward pressure on ETH prices.
2. High Futures Open Interest: The total open interest in Ethereum futures has reached an unprecedented $16.8 billion across major exchanges like Binance, CME, OKX, and Bybit. While this indicates substantial market participation, it also poses significant liquidation risks. Traders using high leverage could face forced liquidations if ETH prices drop, exacerbating volatility and preventing sustained price increases. This precarious situation deters new investors, adding to the stagnation.
3. Competing Blockchain Networks: Ethereum’s network activity growth has been outpaced by other blockchains. High gas fees on Ethereum push users and projects to seek alternatives such as BNB Chain, Solana, and Aptos. These networks offer more scalable and cost-effective solutions, attracting a considerable portion of decentralized application (DApp) users. For instance, BNB Chain boasts significantly higher daily active addresses and transaction volumes compared to Ethereum. This migration of activity away from Ethereum limits its on-chain metrics, contributing to its price struggles.
Despite Ethereum's strong fundamentals and diverse use cases, these factors collectively hinder its ability to surpass the $3,900 mark. The crypto community remains watchful of regulatory developments, market conditions, and competition, which will ultimately influence Ethereum's price trajectory.
Disclaimer: Please note that the information provided in this article is based on the referenced research articles. It is essential to conduct further research and analysis before making any investment decisions. The cryptocurrency market is highly volatile, and investors should exercise caution and consult with financial professionals before engaging in cryptocurrency trading or investment activities.