Ethereum (ETH) has recently experienced a noticeable price drop, trading below the significant support level of $2,400, leading to concerns among traders about a potential decline to the $2,000 mark. This price movement reflects a 13% decrease from its previous level of $2,719 since January 12.
One of the central factors influencing this downturn is the demand area for Ethereum, which was previously seen as a strong support zone. Independent analyst Ali identified a key demand zone between $2,388 and $2,460, noting that if this support holds strong, it could lead to minimal resistance and a potential for upward movement. However, Ether's price action on the daily timeframe shows that the last time its price dropped below this level was in May 2022, resulting in a 63% decrease and trading below $1,000.
Another critical aspect affecting Ethereum's value is the Total Value Locked (TVL) in the Ethereum ecosystem, which is a measure of health and demand for Proof-of-Stake blockchains like Ethereum. The TVL reached a 19-month high of $34.7 billion on January 11 but declined to $32.2 billion by January 22, indicating decreasing demand for the blockchain.
Moreover, the use of decentralized applications (DApps) on the Ethereum network has declined. Prominent DApps such as Instadapp and Compound Finance have seen their TVL decrease by 11% and 9.6%, respectively. Furthermore, Ethereum’s main DApps experienced a 22.65% drop in unique active wallets over the last 30 days, possibly reflecting dissatisfaction with the cost of transacting on the network.
Market analysts are currently showing a pessimistic perspective regarding Ether’s short to medium-term price performance. This sentiment is echoed by the broader crypto market downturn, influenced by factors like the GBTC-linked selling of BTC at Coinbase. However, potential long-term catalysts for price growth may include the increased use of Ethereum-based protocols and the possibility of a spot Ether ETF.
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.