Ethereum Price continues to fall as distressed investors worry about a lack of spot Ether inflows, falling Ethereum network fees, and the possible bursting of a tech stock bubble.
Ethereum ETH Tickers Down $2,392 The price declined 5.2% between September 3 and 4 after a strong rejection at the $2,550 resistance level, marking eight days since its last close above that level.
Traders are now concerned that Ether could underperform even if the broader cryptocurrency bull market resumes, as fixed income incentives in the U.S. are expected to wane. So what exactly is putting pressure on the price of Ether?
Will Ether drop if the tech stock bubble pops?
Some market participants may attribute the lackluster performance of cryptocurrencies to traditional financial market conditions, but Ether also faces its own set of challenges, including lower network fees, unattractive staking rewards, and weak demand for its recently launched cash exchange-traded fund (.ETF) products. Therefore, it is worth considering whether these factors will continue to drive Ether’s price lower in the future.
From a macroeconomic perspective, there is uncertainty over the product of the U.S. Federal Reserve’s likely decision to cut interest rates, which is expect to begin in September.
Esther George, former president of the Kansas City Fed, said there is still hope that inflation will reach 2%, but the Fed’s credibility could be called into question, especially if the labor market weakens, according to Yahoo Finance.
Additionally, Philadelphia Fed President Patrick Harker said the Fed’s rate cuts could become more aggressive if the labor market deteriorates.
Typically, looser monetary policy favors risk markets, but if investors fear an impending recession, demand for safe-haven assets increases, prompting traders to flee to safer investments, which could negatively impact the price of ether.
Declining Ethereum network fees and weak spot Ether ETF flows
In addition to falling network fees, Ether is also struggling with its spot ETF products, which saw $47 million in net outflows on September 3 alone.
In fact, these instruments have seen outflows of $475 million since entering the US market on July 23. The lack of investor interest is concerning, especially since institutional demand was seen as a key part of Ether’s appeal.
According to StakingRewards, the relatively low staking reward of 3.2% has also contributed to the decline in the price of Ether, especially given the current annualized inflation rate of 0.7%.
The yield is lower than that of most US government bonds, and the failure of some analysts to heed the “ultra-monetary” narrative may have disappointed investors.
Cygaar also highlights the relatively low demand for Layer 2 solutions due to the lack of “interesting consumer applications” that could help restore a healthy level of fees.
The analyst questions whether researchers overestimated the demand for rollups and whether gas costs would be necessary for long-term network security.
What is ethereum?
Ethereum a blockchain-based network created to facilitate secure and decentralized financial transactions. The network’s native cryptocurrency is Ether.
Unlike Bitcoin, Ethereum’s programmable blockchain allows users to securely verify and execute code, including smart contracts and decentralized applications.
Smart contracts on the Ethereum network are software applications that automatically execute on the blockchain when certain predetermined conditions are met.
The decentralized nature of the Ethereum network allows developers to run programs without relying on large technology companies or other third parties.
Instead of running software on cloud servers hosted in massive data centers owned by Google, Ethereum users can run applications by leveraging Ethereum’s vast network of small, private computers.
Applications on the Ethereum blockchain include gaming, socializing, gambling, and decentralized financial options. The Ethereum blockchain is also home to the world’s largest non-fungible tokens.
NFTs are unique digital creations that represent ownership of a digital property, such as a piece of art, song, or video.
Ethereum gas price
Ethereum gas is the amount that network users pay to process transactions or use smart contracts on the network. Gas fees are similar to highway tolls. Users pay these fees to use the Ethereum blockchain.
The unit of measurement for gas charges is the gwei. A gwei is one billionth of an ETH.
Bitcoin price vs. ethereum price
Ethereum was launches in 2015. Since then, both Ethereum and Bitcoin have been spectacular investments.
The SEC’s approval of Bitcoin cash ETFs in early 2024 has reversed the performance gap between the two cryptocurrencies. BTC is up 120% and ETH is up 53% year-over-year.
Conclusion
Approved by the SEC in late 2023, Ethereum futures ETFs are relatively new. They do not invest directly. Instead, they hold futures contracts.
The Bitwise Ethereum Strategy ETF (AETH), the VanEck Ethereum Strategy ETF (EFUT), and the ProShares Ether Strategy ETF (EETH) are the three major Ethereum futures ETFs.
Spot Ether ETFs, which include iShares Ethereum Trust (ETHA), Fidelity Ethereum Fund (FETH), and Grayscale Ethereum Trust (ETHE), debuted in July 2024.
