Bank of America Crypto: Risks of Ether Price Losing $1.6K Support

Ether Price Surge Followed by Doubts

Ether (ETH) saw a 31.3% surge in price from March 10 to March 18, which coincided with the Federal Reserve’s injection of $300 billion to address Silicon Valley Bank’s insolvency. Since then, the daily closing price of Ether has consistently remained above $1,600.

However, investors are now questioning whether Ether can sustain this support level, given the bearish sentiment in the crypto space and the declining metrics on the Ethereum network. Over the past six months, the cryptocurrency industry has been hit with several negative developments, such as financial issues for the Digital Currency Group (DCG), the parent company of Grayscale mutual fund manager, and the potential liquidation of the $4.8 billion worth of ETH deposits held in the Grayscale Ethereum Trust. In addition, Binance and Coinbase are facing legal action from the United States Securities and Exchange Commission (SEC). Investors were initially excited when several requests for Ether-based futures exchange-traded funds (ETFs) emerged in early August, but it is important to note that, if approved, these instruments would not involve actual ETH coins.

On-chain metrics point to declining demand

Aside from a few unfavorable market conditions, Ethereum’s on-chain metrics suggest a stagnation in demand, both for ETH investments and smart contract transactions.

Notably, the number of Ethereum addresses holding at least $1,000 worth of ETH has reached its lowest level in nearly six months. This is concerning, considering that Ether’s price reached its peak of $2,130 in mid-April, which should have attracted new investors.

Part of the lack of investor interest can be attributed to the fact that Ethereum’s average transaction fee has remained above $4 for the past six months. Therefore, despite fluctuations in network staking metrics, there seems to be no increase in the total number of investors when using the $1,000 threshold as a proxy.

Moreover, data on decentralized application (DApps) activity on the Ethereum network corroborates the notion of a dearth of new users.

Even excluding the significant 60% decline in the Uniswap NFT Aggregator, the average number of active addresses across the top Ethereum network DApps decreased by 4% compared to the previous month. This applies to all sectors, from cryptocurrency games to decentralized exchanges, nonfungible token marketplaces and Web3 services.

When considering token activity on the network, with the exception of stablecoins and Wrapped ETH, no project has recorded more than 13,000 unique receiver addresses over the past week. This analysis underscores the fact that Ethereum’s network is currently constrained by its relatively high transaction fees, which limits the number of active users. Without an uptick in network activity, the catalysts for a price recovery are lacking, such as potential network upgrades and implementations that could lead to lower costs or enhanced user privacy.

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Competitors are benefiting from the stablecoin volumes

Visa’s incorporation of Solana’s blockchain settlement capabilities and Circle’s USD Coin (USDC) native accounts and transfers on the Base chain have led to some dissatisfaction among Ethereum devotees. Coinbase soon declared that it will assist partners in converting the older, bridged versions of USDC to the new format.

Rune Christensen, MakerDAO’s co-founder, has proposed the development of the decentralized finance project’s forthcoming native chain based on Solana’s codebase, in spite of its long-standing links to Ethereum.

Given the current bearish sentiment in the crypto sphere, which includes exchanges contending with legal issues from the SEC and diminishing enthusiasm for cryptocurrencies, as demonstrated by the newest Google Trends data, the probability of Ether’s price dipping below the $1,600 support level has amplified.

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