Is Ethereum Under Pressure as $259.2 Million Worth of ETH Moves to Exchanges?
Ethereum (ETH), the second-largest cryptocurrency in the market, has recently been experiencing heightened selling pressure, particularly as traders transfer ETH to exchanges.
Within the last 24 hours, more than 108,000 ETH, equivalent to about $259.2 million, have been moved to exchanges, potentially indicating a downward trend in ETH’s price. Increased supply coupled with stagnant demand typically leads to price decreases.
Furthermore, a participant in an Ethereum Initial Coin Offering (ICO) has been consistently offloading ETH. In a recent sale, they liquidated 6,000 ETH worth $14.11 million, bringing the total amount sold since September 22, 2024, to 40,000 ETH, with an average selling price of $2,525. Despite these transactions, the ICO participant still holds 99,500 ETH, valued at approximately $238 million, hinting at possible future selling pressure.
ETH’s Price Performance Relative to Other Assets
ETH has been underperforming when compared to other high-risk assets such as Bitcoin and the S&P 500. While BTC experienced a minor decrease of 0.32% and the S&P 500 saw a positive change of 3.63%, ETH recorded a significant 26% drop over the past three months. The total fees on the Ethereum network have also dwindled by 43.9%, amounting to $247.6 million, contributing to Ethereum’s challenges. On-chain activity on Ethereum’s Mainnet has decreased over the last quarter as well.
The Impact of the Dencun Upgrade
The Dencun upgrade has had an impact on Ethereum’s performance. This upgrade, which featured EIP 4844, reduced Layer 2 (L2) transaction costs significantly, leading to a surge in L2 activity. Consequently, Mainnet fees for ETH hit an all-time low, affecting the amount of ETH being burned and transitioning the cryptocurrency back to an inflationary trajectory from a previously deflationary one.
The decrease in on-chain fees due to the summer slowdown and sideways trading in traditional markets has been akin to a company experiencing revenue declines and halting its stock buybacks. These changes have put pressure on ETH’s price. Moreover, the long-term benefits ETH can derive from L2s’ miner extractable value (MEV) remain uncertain.
L2 Influence on ETH and the Ascent of Optimism
Optimism (OP), a prominent Layer 2 network on Ethereum, has observed its governance token outperforming others. In the third quarter, the OP/ETH pair surged by 28%, benefitting from increased on-chain L2 activities, indicating superior performance compared to Ethereum. The rise of Optimism, partly attributed to Coinbase’s Base L2 operating on the Optimism Superchain, underscores the growing significance of L2s, further impacting Ethereum’s valuation.