Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has been experiencing a notable downtrend recently.Several factors contribute to this decline:
1. Increased Supply Leading to Inflationary Pressure
Since April 2024, Ethereum's network supply has been on the rise, reversing the deflationary trend that followed the Merge.he total supply has grown by approximately 0.37% over the past nine months, reaching 120.4 million ETH.his increase in supply, coupled with diminished demand, has raised concerns about Ethereum's price trajectory.
2. Underperformance Relative to Competitors
n 2024, Ethereum significantly underperformed compared to major cryptocurrencies like Bitcoin and Solana.hile Bitcoin surged by 37.5% and Solana by 25%, Ethereum managed only a 6.9% increase.his lag is partly due to sluggish inflows into Ether-focused exchange-traded funds (ETFs), which saw total outflows of $480.4 million since their launch on July 23, 2024.n contrast, Bitcoin ETFs registered net inflows of $5.2 billion within their first 27 days of trading.thereum's scalability challenges and competition from faster, more cost-effective networks like Solana have also contributed to its underperformance.
3. Technical Indicators Pointing to Bearish Sentiment
echnical analysis reveals that Ethereum has dropped below the $3,087 support level, indicating a clear downtrend.he price is currently below both the 50 and 200 moving averages, and the Relative Strength Index (RSI) is in the oversold territory at 22.hese indicators suggest a prevailing bearish sentiment among traders.
4. Market Dynamics and Investor Sentiment
he broader cryptocurrency market has faced increased selling activity, contributing to Ethereum's decline.or instance, Ethereum experienced an 8% drop following a dip in the crypto market triggered by external factors.In summary, Ethereum's recent downtrend is influenced by a combination of increased supply leading to inflationary pressures, underperformance relative to competitors, bearish technical indicators, and broader market dynamics.Investors should closely monitor these factors when making decisions related to Ethereum.
