- Ethereum has underperformed key assets within and outside the crypto market.
- Ethereum is an innovation at the level of human civilization but is mispriced due to lack of killer applications, says F2pool co-founder.
- Ethereum could decline toward $2,111 if it fails to reclaim the $2,400 support level.
Ethereum (ETH) is down 2% on Thursday following a key analysis showing the top altcoin has underperformed assets, including Bitcoin, Solana, Nvidia, Meta, Apple, Gold and others. CryptoQuant analysts and the F2pool co-founder weigh in on why ETH has underperformed and what investors should expect.
Daily digest market movers: Is Ethereum underperforming or undervalued?
According to Ecoinometrics, Ethereum has been the worst-performing asset among large capitalization assets year to date. While Nvidia, Meta, Bitcoin, Apple, Gold, Google, Amazon, NASDAQ and Microsoft have posted gains of 142%, 48%, 38%, 22%, 19%, 18%, 18% and 12%, respectively, Ethereum struggles with a return of only 9%.
The fall outlook isn’t great, more downside risk:
— ecoinometrics (@ecoinometrics) September 5, 2024
• Small rate cuts probably won't boost market liquidity much.
• U.S. economic uncertainty may weaken the broader market.
Now is a time for caution rather than bold moves.
Follow @ecoinometrics for more charts and insights on…
Following anticipation of Ethereum's The Merge second anniversary marking the transition to a proof-of-stake consensus mechanism, CryptoQuant's analysts noted that the top altcoin struggles began after the event. According to the analysts, Ethereum has underperformed Bitcoin, Solana and BNB by 44%, 53% and 18%, respectively, since The Merge.
CryptoQuant analysts noted that some key reasons for the underperformance include a lower total transaction count in the Mainnet, which caused a decline in transaction fees. Additionally, Ethereum's supply has been rising and may not hold its deflationary status again. The analysts attributed the rising supply and weak network activity to the Dencun upgrade in March, which introduced new architectural dynamics in Ethereum.
Considering the FUD following ETH's underperformance, Shenyu, co-founder of F2pool, noted that Ethereum is still an innovation at the level of human civilization, and the market underestimates its value because killer applications have not yet emerged.
"As investors, we must tolerate this kind of mispricing and volatility in order to get real returns," said Shenyu.
Meanwhile, Ethereum ETFs recorded a second consecutive day of negative flows with net outflows of $37.5 million. Grayscale's ETHE posted outflows of $40.6 million, while its Mini Ethereum Trust saw inflows of $3.1 million.
ETH technical analysis: Ethereum could see further decline if it fails to reclaim key support level
Ethereum is trading around $2,390 on Thursday, down more than 2% on the day. In the past 24 hours, ETH has seen $14.74 million in liquidations, with long and short liquidations accounting for $11.09 million and $3.65 million, respectively.
ETH has breached the support level around $2,400 of a key rectangle for the second time in the past three days. ETH traded inside this rectangle for over three weeks in August before moving outside it on Tuesday.
ETH/USDT 4-hour chart
If ETH fails to quickly reclaim the $2,400 support, its price could decline toward the $2,111 support level. This aligns with a key trendline that suggests ETH will likely decline to the support level around $2,111 before staging a rally.
The Relative Strength Index (RSI) is below its midline but attempting to move above its moving average. If it completes this move, ETH could see a brief rise.
In the short term, ETH could rise to $2,425 to liquidate positions worth more than $45 million.
Ethereum development FAQs
After the Merge, the Ethereum community is looking at the Sharding upgrade next, which has been slated for sometime later in the year. The development can be summarized in four words, “scalability through more efficient data storage.” The software update will increase the capacity of the blockchain, widening the amount of data that can be stored or accessed. At the same time, all services running atop the Ethereum blockchain will enjoy significantly reduced transaction fees.
A fork is the splitting of a blockchain after developers agree and proceed to implement upgrades. The decision comes after these developers reach a consensus for a software upgrade. The ensuing part will see one part continue with the status as is, while the other one will proceed with new features combined with the former ones. A hard fork basically entails permanent divergence of a new side chain from the original one, while a soft fork is doing the same, only difference being that it is temporary.
EIP-4844 is an improvement proposal for the Ethereum network. The upgrade promises reduced gas fees, which is a valuable offering considering the high transaction cost that continues to daunt crypto players. It has been a long-standing concern for the Ethereum network. The proposal is also referred to as “proto-Danksharding,” with an unmatched ability to increase the speed of transactions on the Ethereum blockchain. At the same time, it helps to reduce the transaction cost as everything becomes decentralized.
Gas token is a new, innovative Ethereum contract where users can tokenize gas on the Ethereum network. This means they can store gas when it is cheap and start to deploy the gas once the market has shifted to the north. The use of Gas token helps to subsidize high gas prices on transactions, meaning investors can do everything from arbitraging decentralized exchanges to buying into initial coin offerings (ICOs) early.
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