Do you remember the excitement of Election Night last year? Ethereum experienced a significant surge, marking its longest green candlestick in three months and jumping by 12% in a single day to settle at $2,721. However, as of 19 January, it has retraced 20% from its peak of $4,015 during that rally.
As we navigate through the current developments, the upcoming week will be crucial in determining whether Ethereum can uphold its historical trend of a bullish first quarter.
The Significance of Historical Data in the Crypto Space
Historically, Ethereum has demonstrated strong performance in the first quarter, with returns often doubling or even tripling over the past four years. For instance, in 2023, ETH witnessed a 54% increase, reaching $1,800 by the end of the quarter. Notably, the standout year was 2021, with ETH skyrocketing by 160% to $1,920 within a span of three months.
However, the pace of growth has decelerated since then, and the year-on-year returns are also showing signs of tapering off, posing a dilemma for long-term holders. This shift in market sentiment is evident in the Coinbase Premium Index (CPI), which indicates a slowdown in buying activity.
Even during the post-election rally last year, when the crypto market cap hit a record high of $3.70 trillion, the buying frenzy for ETH among U.S. investors did not significantly impact the CPI, signaling a waning enthusiasm across the market.
Four years ago, Ethereum’s market cap reached $500 billion, propelling its price to $4.76k. Comparatively, the current scenario shows a 22% decline, with ETH trading at $3.2k. While quarterly returns are cooling down, investors are closely monitoring ETH’s struggle to surpass key psychological resistance levels.
Despite the broader market recovery, Ethereum’s inability to breach the $4k mark contrasts sharply with XRP, which has already surged by 53% in the first quarter. Investors are clearly seeking higher returns, leading other major cryptocurrencies to seize the spotlight.
The Looming Threat of Ethereum Falling Behind
Zooming in on XRP, its market cap has surged to a new all-time high of $180 billion, now half of Ethereum’s valuation. Meanwhile, Ethereum has experienced a 3% decline since the start of the year, raising concerns that XRP could potentially overtake Ethereum sooner than anticipated.
Despite the withdrawal of 540k ETH and an influx of $1.84 billion in fresh capital, Ethereum has seen a 2% drop over the past month. Additionally, the exchange balances have reached a historic low, reflecting the lack of bullish momentum and casting a shadow over Ethereum’s long-term prospects.
One alarming trend is the significant increase in positions held by long-term holders (LTHs), growing by 75% in the past year. However, with diminishing returns, these LTHs might consider exiting their positions, heightening the significance of the $4k level as a critical juncture for ETH in the upcoming days.