Ethereum supply has dropped to the lowest since November 2015. There are now only 8.97 million ETH. According to an analysis conducted by Santiment on March 21, this significant drop is due to the increasing popularity of Decentralized Finance (DeFi), and staking. The selling pressure on assets has declined as more investors choose to keep their assets off exchanges and instead lock them up. This is a sign of a longer-term accumulation.
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The Supply Curse Hasn’t Increased Prices
Ethereum has been struggling to maintain its price despite the supply shortage. ETH’s price has fallen 47% since its high in December of $4,105, to just $1,990 on March 21. This makes it the most underperforming of all major cryptocurrencies. Technical and on-chain indicators indicate that more downside is possible.
Analysts lower ETH price target amid rising competition
Standard Chartered analysts have recently revised Standard Chartered’s ETH price target for the year to end from $10,000 down to $4,000 The analysts cite the growing competition of other blockchain networks and in particular Ethereum’s layer-2 solutions. The layer-2 networks that offer lower transaction costs are drawing more users away from the Ethereum mainnet.
DeFiLlama’s data shows that Ethereum-based DEXs processed $9.8 Billion in the last week. Arbitrum and Base accounted for $5.67 Billion of this volume. The monthly volume of Ethereum DEXs has decreased from $92 Billion in December, to $82 Billion in February. March is expected to show even lower numbers.
Ethereum’s declining fee revenue and TVL
The shrinking Ethereum mainnet has had a direct impact on its revenue from fees, which is a critical component of the Ethereum economic model. The fee revenue dropped from $218 million in December to only $ 46 million in February. The recent Dencun Upgrade has reduced gas charges by 95% but it is not enough to offset declining network revenues.
Ethereum’s Total Value Locked (TVL), which was $76 billion last December, has dropped to just $46 billion. This shows a sharp drop in the network usage and inflow of capital.
Can Ethereum ETFs be a lifeline for investors?
The approval of a stake in exchange-traded funds (ETFs) could be a catalyst for Ethereum. New York Stock Exchange and Chicago Board Options Exchange submitted applications to the U.S. Securities and Exchange Commission to allow the staking of Ethereum ETFs. Institutional interest is low as shown by $370 million of outflows in Ethereum Spots ETFs during the last month.
Tech Analysis: Levels of Interest
Ethereum is struggling to overcome the $2,042 resistance. Bollinger Bands show low volatility and the 50-day moving average. This suggests a consolidation period.
Ethereum’s Relative Strength Index is at 41.22. This indicates that ETH has recovered from an oversold condition, but still lacks a strong upward momentum. The low trading volume is indicative of uncertainty, but a small increase in accumulation was observed.
If ETH can break through $2,042, then the next levels of resistance are $2,163 or $2,370. If the price does not hold at $1,986, it could fall further to $1,714 where there was a lot of buying interest in previous months.
conclusion
Ethereum’s decreasing exchange supply indicates long-term accumulation. However, the price of Ethereum remains at risk due to increasing competition, declining fee revenues, and diminishing interest from institutions. Staking Ethereum ETFs may provide a boost to the market, but ETH will need to overcome some key technical obstacles for this trend change. As the market develops, investors should be keeping an eye on critical levels.
