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The cryptocurrency market is facing headwinds as Ethereum struggles with declining activity, signaling potential further price setbacks for Ether (ETH).
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Analysts are closely monitoring Ether’s performance as it remains vulnerable to external market pressures and internal supply dynamics.
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“As long as transaction volumes remain low, Ethereum’s price could continue to see downward pressure,” stated a COINOTAG expert.
Ethereum’s price is under pressure in a declining market, with transaction volumes down and inflation in ETH supply posing a threat to further downside.
Ethereum’s Network Activity Slumps Amid Market Uncertainty
Recent data indicates a significant decline in Ethereum’s network activity, as transaction fees and daily transactions fall to levels not observed in nearly two years. In the wake of market turmoil spurred by geopolitical events and economic signals, ETH’s price dropped substantially, going from a high of $3,432 in January to lows near $1,750.
Although there was an 18% rebound in subsequent weeks, Ether has struggled to break through the challenging resistance level of $2,000. This resistance has reflected a broader market sentiment that remains skewed towards caution, as reflected in Ethereum’s daily transaction count—which has collapsed to figures last seen in October 2024.
New trends indicate that low transaction volumes correlate with weak demand for Ethereum’s block space, affecting various sectors including DeFi, NFTs, and DApps. Historically, higher transaction counts and spikes in transaction fees have positively influenced Ether’s price, yet the current fee levels highlight reduced market confidence.
Low Transaction Fees Signal Diminished Demand
With Ethereum’s average transaction fees dropping to an all-time low of just 0.00025 ETH ($0.46) as of March 24, the decreasing cost of transactions hints at a lack of active engagement on the network. This drop represents a critical threshold, as fees below certain levels could indicate that interest in the Ethereum ecosystem is waning. Moreover, this trend mimics previous downturns when network activity tapering was followed by price drops, underlining the symbiotic relationship between transaction fees and Ether’s market value.
Inflationary Pressures from ETH Supply Growth
Another key contributor to Ether’s bearish outlook is the recent return of supply inflation. As transaction fees have decreased, Ethereum’s burn rate has also fallen significantly, leading to increased supply. According to recent metrics from Ultrasound.money, the projected ETH burn rate is now down to 25,000 ETH per year, with the overall supply growth rate climbing to 0.76% annually.
These changes have reversed the deflationary climate that accompanied the transition to proof-of-stake, commonly referred to as “the Merge,” which took effect in September 2022. Now, Ethereum’s total supply has surpassed pre-Merge figures, raising concerns among stakeholders. When there are fewer transactions and thus less ETH burned, the result is an inflationary environment that exerts further downward pressure on prices.
Technical Analysis: Bear Flag Formation Signals Further Decline
In terms of technical analysis, Ether’s price action is currently forming a bear flag on the daily chart, suggesting the potential for a renewed bearish trend. The pattern indicates that a close below the flag’s lower boundary at approximately $2,000 would trigger significant sell-off activity, with analysts predicting a target price near $1,230—a striking 40% decline from its current positioning.
While some traders remain optimistic about Ethereum’s recovery and potential for a bullish deviation around the $2,200 mark, the prevailing indicators lean heavily towards the bearish side. Analyst sentiment reflected a cautious outlook, with the general consensus being that market conditions must improve for a significant rebound.
Conclusion
As Ethereum navigates through declining network activity and a return to inflationary measures, the prospect of further price declines looms large. Observers should monitor both market trends and internal supply metrics closely, as these factors will be decisive in shaping Ether’s short to medium-term trajectory. In conclusion, a cautious stance is advised for investors until clearer signals emerge.
