Ether (ETH) has experienced a 36% increase in its price in 2023 when measured in U.S. dollars. However, this recovery is relatively small considering that ETH is currently trading 66% below its peak of $4,870 in November 2021.
Ethereum vs. Bitcoin: A 14-Month Downtrend
On September 20, Ether reached its lowest levels against Bitcoin (BTC) in 14 months, breaking the critical 0.06 BTC support level. This has raised concerns among Ether investors about the reasons behind this price decline and what it will take to reverse the trend.
ETH buyers were optimistic about protocol upgrades that reduced the need for new coin issuance during the network’s transition to a proof-of-stake consensus mechanism. These upgrades were successful, resulting in an annualized issuance rate of only 0.25% of the supply. This aligns with the Ethereum community’s vision of “ultrasound money.”
The subsequent Shapella upgrade on April 12 addressed a major concern for investors by allowing withdrawals from the native staking protocol. This boosted confidence among Ethereum enthusiasts and led to a prediction that Ether’s price would surpass $2,000, which came true on April 14. However, this optimism was short-lived as ETH quickly fell back to $1,850.
Despite the price decline, Ethereum staking experienced a net inflow of 3.1 million ETH in the 30 days following the Shappela upgrade, exceeding expectations. With planned developments generally on track, investors now need to explore other potential catalysts for reversing the current downtrend in Ether’s price relative to BTC.
External Factors Impacting ETH Price
One potential catalyst lies in the ongoing legal battle between Ripple and the U.S. Securities and Exchange Commission (SEC). The outcome of this case could significantly impact Ether’s price momentum. The SEC argues that XRP sales to retail investors are considered a securities offering. However, a ruling in July suggested that XRP does not qualify as a security under SEC guidelines.
Another concern for investors is the regulatory uncertainty surrounding the Ether initial coin offering (ICO). Recently, an Ethereum address associated with the ICO era showed activity, transferring ETH directly to Coinbase. This movement has amplified regulatory concerns since there are no apparent incentives for addresses that have remained dormant for several years to divest at this point in the market cycle.
A similar occurrence happened with an address linked to Vitalik Buterin, who sent ETH to the Kraken exchange. These regulatory uncertainties pose risks for Ethereum investors.
Positive Developments Give Hope
Ethereum has also seen positive surprises, such as the request for a spot Ether exchange-traded fund (ETF) by ARK Invest and 21Shares. This reduces the risks associated with institutional concentration in Bitcoin if the ETF is approved.
In addition, Canto, a layer-1 Cosmos-native blockchain, announced its expansion to Ethereum’s layer 2. This development aims to bring traditional finance into the Ethereum ecosystem and could benefit Ether’s price if Bitcoin’s surge is driven by ETF approval or inflation concerns in the United States.
Despite competition from Solana and BNB Chain in the decentralized applications sector, Ethereum’s dominance in terms of total value locked and trading volumes remains unchallenged due to similar risks these competitors face with ICO and securities regulations.
Hot Take: Challenges Ahead for ETH Price Recovery
Ether has made some progress in its recovery this year, but it still has a long way to go to reach its previous peak. The ongoing legal battle between Ripple and the SEC, as well as regulatory uncertainties surrounding the Ether ICO, continue to pose risks for Ethereum investors. However, positive developments like the potential approval of a spot Ether ETF and Canto’s expansion to Ethereum’s layer 2 provide hope for a price recovery. In the face of competition from Solana and BNB Chain, Ethereum remains dominant in the decentralized applications sector. Overall, while challenges persist, there are opportunities for Ether’s price to rebound in the future.
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