Ethereum, the second-largest cryptocurrency by market cap, has recently shown signs of changing market sentiment and dynamics, according to a analysis by a CryptoQuant analyst named Percival.
The analyst revealed that various market conditions and technological developments have impacted Ethereum’s dynamics and led to differing opinions on its future growth trajectory.
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Ethereum market sees change
Percival highlighted that Ethereum has faced a decline in activity due to the emergence of other blockchains with greater accessibility, most advanced technologyand faster update cycles.
According to the analyst, “the positive sentiment of Momentum is far below expectations”. So far, open interest in Ethereum futures – a measure of capital flowing into derivatives contracts – has reached $9.2 billion, with a notable inflow of $2.12 billion in August 2024.
This represents an increase of 30%, but is insignificant compared to the inflow of 6 billion dollars observed between April and May, reflecting only half the previous dynamism.
Another important observation from the analysis was the “Coinbase Premium Gap”, indicating the difference between the price of Ethereum on Coinbase and other global exchanges.
A slowdown in selling pressure from US-based investors suggests a possible positive shift in market sentiment. However, the market is still awaiting a significant inflow of capital to drive a strong recovery in Ethereum.
The analyst highlighted that any future price recovery it would depend on substantial investment flows, which have not yet materialized.
Furthermore, following Federal Open Market Committee (FOMC) announcements, Ethereum rates rose, suggesting a possible shift of capital from traditional treasuries to decentralized finance (DeFi).
The analyst mentioned an example: DeFi lending platform Aave, which operates on the ETH network, saw a moderate increase in fee collection, from $42 million in March to $43 million in August.
Ethereum network lags behind
Although Percival noted that from an economic point of view, Ethereum needs revert to your maximum average gas passage rateAligning its growth with its intrinsic value, the analyst further suggests that Ethereum currently faces several internal gaps.
Although the technological ecosystem around Ethereum is expanding, the network appears to be lagging behind the competition, according to Percival. The CryptoQuant analyst reveals that this disconnect between the capabilities of Ethereum and its technological rivals has led to a significant drop in investment.
Furthermore, the limited small capital entry and lack of consistent use suggest that even smaller investments are not being sustained over time.
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The analyst’s opinion is further validated by the fact that the Ethereum network has faced increasing competition from alternative blockchains like Solana, Binance Smart Chain and others that feature higher transaction speeds and lower fees.
This has diverted, to some extent, attention and investment from Ethereum to these newer ecosystems.
Featured image created with DALL-E, TradingView chart
