The digital realm of Ethereum, with its native cryptocurrency ETH, is experiencing an intriguing paradox of sorts. Despite witnessing a substantial uptick in daily users and transaction volume, the price of ETH seems remarkably non-responsive, showcasing a downward trend instead.
Over the past week, Ethereum’s value has dipped by more than 10%, trailing behind both Bitcoin and the S&P 500. This drop is not a standalone incident as it mirrors the general trend across most major cryptocurrencies. Yet, juxtaposed with this price depreciation is a steady upswing in the number of daily active Ethereum addresses, marking a significant growth over the past month.
Conventional wisdom posits that increased network activity propels cryptocurrency prices upward, given the enhanced demand. Indeed, this theory seems to hold water in the case of Ethereum, at least until recently. Daily active Ethereum addresses have burgeoned by more than 46% since the dawn of this year.
This activity heightened significantly in line with a price surge over the preceding few months. In an impressive leap from $2,909 on February 24, Ethereum peaked at a two-year high of over $4,000 on March 12, indicating a rise of more than 39%. Concurrent with this price jump, the number of daily active addresses ascended from 432,647 to 515,145 in the same period.
However, no sooner had Ethereum’s value breached the $4,000 mark than it started to falter, experiencing a 17% drop over the following 10 days. Nevertheless, the network’s on-chain activity data seems largely impervious to this price downturn, with the past 24 hours witnessing a record high of 618,407 daily active addresses since October 2023.
Corroborating this trend, IntoTheBlock data suggests that ETH’s daily average volume has been ascending in a fashion akin to the pattern observed in the early bull market of 2020. Consequently, this week saw the quantum of ETH transferred on Ethereum reach an apex not seen since May 2022.
At present, Ethereum hovers around a trading price of $3,420, a drastic tumble from its recent highs. Of course, the price of a cryptocurrency such as ETH hinges predominantly on market sentiment and speculation. Rapid adoption and surges in network activity could indeed presage long-term price growth, but speculative forces reign supreme in the immediate term.
Simultaneously, ETH grapples with an array of pressures that threaten to keep its price under check. A recent disclosure that the U.S. Securities and Exchange Commission (SEC) is prying on Ethereum and the Ethereum Foundation and might possibly classify ETH as a security serves as one such alarming signal.
As the runner-up in the cryptocurrency race, ETH’s designation as a security could trigger a domino effect, sending ripples of chaos throughout the crypto asset sector. A glimmer of hope remains, though, as Ethereum seems to have unearthed a minor support at the $3,280 price bracket. Yet, a failure to stabilize above this price might foreseeably precipitate a further downward spiral.
