Multiple price indicators drop ETH at risk of losing $1,600 support

Author: Marcel Pechman, Cointelegraph; Compiler: Songxue, Golden Finance

From March 10 to 18, the price of Ethereum surged 31.3%, which coincided with the Federal Reserve's injection of $300 billion to solve the bankruptcy of Silicon Valley Bank. Since then, the price of Ethereum has maintained a daily close above $1,600.

However, investors are now skeptical about ETH’s ability to maintain this level of support, given the prevailing bearish sentiment in the cryptocurrency space and the drop in ETH network metrics. **

The cryptocurrency industry has been plagued by negative developments over the past six months. Notably, Digital Currency Group (DCG), the owner of Grayscale Mutual Fund Management, has faced financial problems. ** Concerns are growing that some of the $4.8 billion worth of ETH deposits held by the Grayscale Ethereum Trust may be liquidated to resolve DCG’s debt. **

In addition, Binance and Coinbase, the two largest exchanges in the world, are currently facing legal proceedings from the U.S. Securities and Exchange Commission (SEC). Additionally, investors initially expressed excitement when demand for some futures-based Ethereum exchange-traded funds (ETFs) emerged in early August. However, it is worth noting that unlike spot ETFs, these instruments, if approved, will not involve actual ETH tokens.

On-chain metrics point to falling demand

In addition to some unfavorable market conditions,** Ethereum’s on-chain metrics point to stagnant demand, both in terms of ETH investments and smart contract transactions. **

The number of Ethereum addresses that have deposited at least $1,000 in ETH. Source: Coin Metrics

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

**Part of the reason for the lack of interest from investors is that average transaction fees on Ethereum have remained above $4 over the past six months. Therefore, despite fluctuations in the network's staking metrics, the total number of investors does not appear to be increasing when using the $1,000 threshold as a proxy. **

Additionally, data on decentralized application (DApp) activity on the Ethereum network corroborates the notion that new users are scarce.

Top DApp on Ethereum network, 30-day active address. Source: DappRadar

Even excluding the impact of the Uniswap NFT aggregator's massive 60% drop, the average number of active addresses for the Ethereum network's top DApps fell 4% from the previous month.

According to data from DappRadar, the number of active users is declining in every field, from cryptocurrency games to decentralized exchanges, NFT markets and Web3 services. Regarding token activity on the network, no project other than stablecoins and Wrapped ETH recorded more than 13,000 unique recipient addresses in the past week.

Top coins divided by unique recipients over the past 7 days. Source: Etherscan

This analysis highlights the fact that Ethereum’s network is currently constrained by its relatively high transaction fees, which limits the number of active users. Without increased network activity, there will be a lack of catalysts for price recovery, such as potential network upgrades and implementations that could reduce costs or enhance user privacy.

Competitors are benefiting from stablecoin trading volume

Meanwhile, recent developments have left ethereum enthusiasts somewhat disappointed. After Circle's USD Coin introduced native accounts and transfers on the Base chain, payment processor Visa also integrated the Solana blockchain settlement function. In response, Coinbase immediately announced its intention to assist partners in converting the old bridged version of USDC to the new format.

Additionally, MakerDAO co-founder Rune Christensen proposed a proposal to develop the decentralized finance project’s upcoming native chain based on Solana’s codebase, despite its longstanding ties to Ethereum.

As the latest Google Trends data shows, Ethereum price fell below the $1,600 support amid widespread bearish sentiment in the cryptocurrency market, which includes exchanges facing legal challenges from the SEC and declining interest in cryptocurrencies. The odds have increased.