Ether’s price has taken a hit, dropping over 5% in the past 24 hours to fall below $2,600, while bitcoin also saw a 2.9% decrease to $95,700 during the same period. This decline has had a significant impact on the CoinDesk 20 Index, which has fallen by nearly 4% due to a broader market downturn triggered by U.S. President Donald Trump’s announcement of plans to unveil reciprocal tariffs, raising concerns about a potential trade war with major trading partners.
The recent performance of Ether is not just a result of external market conditions but also influenced by various factors specific to the cryptocurrency itself. One key factor is the increase in its circulating supply, surpassing pre-Merge levels. The Ethereum Merge, which transitioned the network to a Proof-of-Stake consensus mechanism by merging it with the Beacon Chain, was expected to reduce Ether’s supply. However, this trend reversed following the activation of the “Dencun” upgrade, which affected the growth of layer-2 networks by reducing data fees and introducing transaction “blobs” to lower transaction costs.
The reduction in transaction fees on the Ethereum network has led to a decrease in the amount of Ether being burned, resulting in a rise in its supply. Since the implementation of EIP-1559 in 2021, where a base fee is burned with every transaction, the supply of Ether has been decreasing. However, with fewer Ether being burned, its supply has grown in recent months, as data from Ultrasound.money indicates an increase of 8,242 ETH since the Merge.
The market woes surrounding Ether have been further compounded by delays from the Securities and Exchange Commission (SEC) in deciding on listing options contracts for BlackRock’s iShares Ethereum Trust (ETHA). Additionally, restrictions from the Ethereum Foundation and increased competition from networks like Solana have added to the pressure on Ether’s value, which has dropped relative to Bitcoin to levels last seen in 2021. JPMorgan highlighted the lack of a compelling narrative for Ether compared to Bitcoin in a recent research report.
Despite the current bearish sentiment, analysts have identified a potential setup for a price rebound based on historical patterns. OTC trader Jake Ostrovskis noted strong demand for Ether in over-the-counter markets, while Santiment analysts highlighted a decrease in the amount of ETH tokens at a profit, suggesting a possible bounce back once market conditions stabilize.
In conclusion, while Ether may be facing challenges in the market, there is optimism among analysts for a potential turnaround based on historical trends and demand indicators. As the cryptocurrency landscape continues to evolve, it remains to be seen how Ether will fare in the coming days and weeks.
