Despite Ethereum’s significant decline from its all-time high of $4,891 in November 2021, where it experienced a notable drop of 67.44%, the cryptocurrency continues to exhibit signs of resilience, boasting a 37% recovery since the start of the year.
Data from 21milyon.com reveals that Ethereum faced a 2.67% drop in the past week, with its current price standing at $1,592. Moreover, the trading volume has decreased by 41.83% over the last 24 hours, amounting to $2.93 billion.
Challenges Ahead: The Impact of Proof-of-Stake and Network Centralization
The recent performance of Ethereum has raised concerns about its future trajectory. Experts attribute Ethereum’s relatively lackluster performance to the implementation of Proof-of-Stake (PoS) through The Merge. While this transition brings about a remarkable 99% reduction in energy consumption and notable efficiency enhancements, it also results in an increase in liquid stake transactions. Approximately 10% of the total Ethereum supply, which equates to around 12 million ETH, is currently locked in platforms like Lido Finance.
However, this shift has also sparked concerns about network centralization, a factor contributing to Ethereum’s underperformance. In a report issued recently, JPMorgan analysts expressed disappointment regarding the surge in network activity despite the improved energy efficiency and deflationary mechanisms.
The report highlighted a 12% decrease in daily transactions, a nearly 20% reduction in daily active addresses, and an almost 8% decline in the total value locked (TVL) within decentralized finance (DeFi) on the blockchain.
On a separate note, prominent crypto analyst Ali Martinez pointed out the lack of substantial buying activity among Ethereum whales. These influential investors, known for their substantial holdings, possess the potential to significantly influence the market when they engage in substantial buying or selling activities.
The Future of Ethereum: Decreasing Gas Fees and Price Outlook
Despite these challenges, data shared by leading analytics firm Santiment indicates a significant decrease in Ethereum gas fees. According to Santiment, Ethereum’s gas fees have reached their lowest levels since 2023, with each transaction currently costing $1.15.
Santiment commented on this development, saying:
“Historically, we have seen increased usage as ETH becomes more affordable. Increased utility can then lead to improvements in market value levels.”
After briefly testing the waters above $1,650, Ethereum encountered resistance at $1,670 and subsequently entered a downward trend. To turn short-term bullish expectations into reality, Ethereum must maintain support above the $1,615 level and continue ascending towards the range of $1,850 to $1,900. Conversely, a critical support level to watch is at $1,500.