The price of Ethereum’s native coin, Ethereum (ETH), is up about 35% so far in 2023. But its attempts to break above $2,000, a psychological resistance level, have seen strong bearish rejections several times.
Let’s take a closer look at the three possible reasons why Ethereum price has failed to decisively reclaim $2,000 since May 2022.
Ethereum price paints carry a fractal cycle
Ethereum’s inability to surpass $2,000 in 2023 is similar to the bearish rejection near $425 in 2018-2019.
Either way, Ether appears to be in a recovery phase as it closes above the 0.236 Fibonacci line on the Fibonacci retracement chart.
In 2018-2019, the 0.236 Fibonacci line was near $425 and was instrumental in limiting Ethereum redemption attempts. In 2023, the same line approaches $2,000, once again imposing itself as a sell zone, thus putting pressure on the ETH price lower.
Stronger US dollar, Bitcoin
A rising US dollar has depressed demand for Ethereum in recent months, reducing its ability to decisively close above $2,000.
The prevailing negative correlation between top cryptocurrencies and the dollar was the main reason. In 2023, in particular, the weekly correlation coefficient between Ethereum and the US Dollar Index (DXY) has been consistently negative, as shown below.
Meanwhile, Ethereum has underperformed Bitcoin largely in 2023 due to the ongoing Bitcoin ETF hype. For example, the widely tracked ETH/BTC pair is down 20% year-to-date (YTD).
Additionally, net capital held by Ethereum-related investment funds has fallen by $114 million so far in 2023, according to CoinShares weekly report. In comparison, Bitcoin-based funds attracted $168 million in the same period.
Related: It’s Time to ‘Pull the Brakes’ on Ethereum and Return to Bitcoin: K33 Report
Ethereum network activity decreases
The total value locked (TVL) across the Ethereum ecosystem has decreased from 18.41 million ETH to 12.79 million ETH so far in 2023. This confirms the reduced availability of funds, Which leads to lower returns for investors, JP Morgan analysts recently warned.
The TVL decline was accompanied by a decline in Ethereum network gas fees, which reached a yearly low on October 5th.
#Ethereum‘s network has been particularly cheap to use, and this week’s average fee level of $1.13 is the lowest since November 2022. Although it is by no means a perfect signal, the decline $ Ethereum Costs generally lead to higher utility and higher prices. https://t.co/ymXFwGJh49 pic.twitter.com/PEGpXMmZ3q
— Santiment (@santimentfeed) October 4, 2023
NFT volumes and unique active wallets on Ethereum have also fallen by 30% and 16.5% in the last 30 days, according to Dab radar.
This includes a drop in key metrics for popular applications, including decentralized exchange Uniswap V2, DEX aggregator 1inch Network, Ethereum staking provider Lido, and others.
Ethereum technical analysis
Meanwhile, Ethereum price technicals show a potential recovery towards the 50-day Exponential Moving Average (50-day EMA; red wave) near $1,665.
However, looking more broadly, ETH/USD is experiencing a bearish continuation pattern called an ascending triangle.
As a result, a break below the lower trend line of the triangle risks a price collapse by the maximum height of the pattern. In this case, Ethereum price could fall to $1,465 and $1,560 in October 2023, depending on the breakout point.
In the short term, a break above the 50-day EMA could send ETH price rising towards the upper trendline of the triangle near $1,730 in October 2023, coinciding with the 200-day EMA (blue wave).
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.