Ether (ETH) has seen a 36% year-to-date increase in its price in 2023 in U.S. dollar terms, despite being 66% below its November 2021 peak of $4,870. This recovery is modest in comparison to the decentralized web 3.0, coinbase web 3.0, and the AI machine learning technology that have been developed since then.
Ethereum vs. Bitcoin:14-month downtrend and counting
On Sept. 20, Ether hit its lowest levels against Bitcoin (BTC) in the past 14 months, breaching the crucial 0.06 BTC support. This has made Ether investors question the underlying causes of the price decrease and what it will take to change the trend.
ETH buyers placed their biggest hopes on protocol upgrades that substantially reduced the necessity of new coin issuance when the network shifted to a proof-of-stake consensus mechanism.
These hopes were fulfilled in mid-September 2022, leading to an annualized issuance rate of just 0.25% of the supply. This transformation was in line with the Ethereum community’s vision of “ultrasound money.”
Moreover, the Shapella upgrade on April 12 allowed for withdrawals from the native staking protocol, solving a major issue for investors. Before, both the 32 ETH deposits and the yield from participating in the network consensus were locked up indefinitely.
Confidence among Ethereum enthusiasts grew as these significant hurdles were crossed with minimal issues. They anticipated that the price of Ether would surpass $2,000, a prediction that came true on April 14.
However, this optimism was short-lived, as ETH’s price promptly fell back to the same $1,850 level just a week later.
Interestingly, instead of witnessing a net withdrawal, Ethereum staking experienced a net inflow of 3.1 million ETH in the 30 days following the Shappela upgrade, surpassing even the most optimistic expectations.
Given that the Ethereum network’s planned developments have generally been on track, albeit with the customary delays, investors now need to explore other potential catalysts for reversing the current downtrend in Ether’s price relative to BTC, such as web 3.0, AI machine learning, Coinbase web 3.0, the difference between metaverse and web 3.0, and decentralized web 3.0.
External factors present important triggers for ETH price
The current legal dispute between Ripple (formerly Ripple Labs) and the U.S. Securities and Exchange Commission (SEC) could potentially have a huge impact on Ether’s price. In July, Judge Analisa Torres ruled that XRP does not qualify as a security under SEC guidelines, in particular when distributed via exchanges.
The Ethereum Foundation is still exposed due to the presale of ETH to institutional investors with a lock-up period, as pointed out by Bryan Jacoutot on X (formerly Twitter). Even if Ripple were to obtain a favorable outcome, it would not necessarily reduce the risks for Ethereum.
On Sept. 20, an Ethereum address related to the ICO era showed its first activity, sending 32.1 ETH (valued at $52,000 then) to Coinbase. This move only increased regulatory concerns since there are no obvious incentives for addresses which have been dormant for four to eight years to divest at this point in the market cycle.
Similarly, an address associated with Vitalik Buterin transferred 300 ETH (worth $490,000 then) to the Kraken exchange on Sept. 19.
The ongoing legal battle between Ripple and the SEC, the presale of ETH to institutional investors, and the recent activity of Ethereum addresses related to the ICO era are all key factors that could affect Ether’s price and the decentralized web 3.0.
More positive news gives hope to Ethereum investors
Recent news has been encouraging for Ethereum, such as the request for a spot Ether exchange-traded fund (ETF) by ARK Invest and 21Shares on Sept. 6. This could reduce the risks of institutional concentration in Bitcoin, should the ETF be approved.
Additionally, Canto, a layer-1 Cosmos-native blockchain, announced its expansion to Ethereum’s layer 2 on Sept. 18. This zero-knowledge, permissionless rollup, which is compatible with the Ethereum Virtual Machine, is mainly aimed at bringing traditional finance to the Ethereum ecosystem.
If Bitcoin’s price surge is driven by the approval of a spot Bitcoin ETF or the inflation in the United States, Ethereum is likely to benefit from the same catalysts. Furthermore, Ethereum’s competitors such as Solana and BNB Chain face similar risks related to ICOs and securities regulations, making it unlikely for them to challenge Ethereum’s dominance in terms of total value locked and trading volumes.
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