[TL; DR]
On 5 August Ethereum reached an 8-month low of $2,100.
Some market analysts have concluded that Ethereum might have reached its 2024 market bottom.
The risk averse investors have an option to invest in spot ETH ETFs to benefit from the Ethereum price movement.
Introduction
Since April, following the bitcoin halving event the crypto market has been experiencing peaks and lows. The major cryptocurrencies such as bitcoin, Ethereum, Cardano and BNB have ranges within which they are fluctuating. This article covers ETH’s recent dip and the possibility of its recovery. We shall also explore the factors behind the recovery as well as the roles of DeFi and various decentralized applications within the network.
ETH Market Analysis: Reasons behind Ethereum’s Recent Price Dip
The market ethereum forecast hints that ETH will recover in the shortest time possible, especially considering the recent launch of spot Ethereum ETFs in the United States. However, let’s have a look at what could have triggered Ethereum’s recent plunge. On 5 August the Ethereum price reached its 8-month low of $2,100. A number of factors might have contributed to that. For example, Jump’s transfer of ETH worth $315 million to exchanges contributed to its price fall. That transfer led to a threat of large liquidations which might have enticed some investors to exit their positions thereby increasing the selling pressure. Geopolitical tensions and the fear of a global recession might have also contributed to the ETH price fall.
Before that sharp price fall there was a decline in Ethereum new and active wallets. For example, between 27 July and 3 August the number of active addresses decreased from 93,840 to 82,540. Also, the daily transactions decreased from $1.17 million on 6 July to $1.11 million on 4 August. The main cause of this decline was the launch of Ethereum ETFs in the United States. This is because many investors opted to invest in ETH ETFs which are regulated rather than in Ether itself.
Read also: Ethereum and its
Analyzing the Rebound: Factors Fuelling Ethereum's Rally
After experiencing one of the worst falls within the last eight months ETH is showing recovery signs. The manner in which the 5 August ETH price fall occurred is similar to what occurred in October 2023 which preceded the 168% boom that followed. A day after recording the 8-month price low ETH showed signs of strong recovery. The price rise emerged from a confluence of a lower trendline of its ascending channel and 200-week exponential moving average as the following graph shows. That cryptocurrency rebound was supported by a rising relative strength index. ETH/USD weekly price chart: TradingView
As observed on the graph, there are several points of confluence. Also, the Ethereum technical indicators look similar to those of October 2023, giving the market confidence of a quick ETH rally that can be accompanied by DeFi growth and a rise in Ethereum investment. It may not be the time to buy Ethereum but astute investors should keep on scanning the market for the “buy the dip” opportunity.
Factors Supporting ETH Price Rally
Despite the recent dip several factors seem to support a strong ETH price rally. Stabilizing global economic conditions may help to inject liquidity in the crypto market. In other words the capital inflow into the DeFi sector as well as the gaming industry will boost the ethereum ecosystem. The DeFi growth will lead to a rise in demand for ETH since it’s a major player in the decentralized economy.
It is important to note that there is a high likelihood for the United States government to cut interest rates in line with a fall in the country’s inflationary pressure. If the Federal Reserve cuts interest rates many crypto investors may opt to buy ETH in order to generate higher returns from their investment than otherwise. Basically, the Federal Reserve may be forced to cut interest rates due to the fear of a recession. Traders anticipate that the US government may cut interest rates by about 0.25% as the next graph indicates. Target rate probabilities for September: CME
What might happen this time is similar to what occurred in March 2020 following the Federal Reserve’s intervention after the COVID 19 induced market crash as the next graph indicates. Source: X
Like what occurred in March 2020 the recent ETH price dip may indicate a market bottom. Regarding the similarity, Milkybull said, “The final capitulation indeed as it hit that lowest point as similarly did in 2020 which signalled a bottom. I don't think this time is different.” Milky bull used the following graph to show the similarity. Source: x.com
As seen on the image the March 2020 situation looks exactly the same as the August 2024 one.
Technical Indicators Supporting the ETH Price Rally
Despite the ETH’s recent price dip, by 12 August it was showing strong signs of recovery. By that time ETH had recovered by over 1% and it had retested the $3,723 resistance level. At the time of writing Ethereum is showing signs of recovery despite fluctuating in a range as the next graph shows. Ethereum Price Movement – CoinGecko
As you note on the monthly chart, a bullish harami has just completed, showing that its price may rise to at least $2.751 before targeting $2,800, the nearest psychological resistance level. What is also worth realizing is that ETH is performing in a similar manner as the other leading cryptocurrencies. Most of them are in red as the following image shows. Price Performance of Leading Cryptocurrencies - Forbes
As you note on the table, most of the leading crypto assets lost within the last 7 days.
Looking Ahead: Challenges and Opportunities ETH Face
No doubt, ETH faces some challenges. It also has some opportunities. ETH like other cryptocurrencies may be affected by regulations which governments may introduce in the future. Lack of regulatory clarity at the moment is stifling innovations in the crypto sector in general and the Ethereum ecosystem in particular. The other challenges that the Ethereum network and Ether face are security breaches, scalability limitations, rising competition and price volatility. On the other hand, ETH may get new use cases as the crypto sector expands.
Strategies for Capitalizing on Ethereum’s Rally
The ETH market analysis shows that the future of the crypto asset is bright. As a result there are several ways in which individuals and institutions can invest in the number one altcoin. For example, new investors in the crypto sector can simply buy and hold ETH. The investors who are risk averse can invest in spot Ethereum ETFs since they are regulated. However, all investors should use various tools such as technical indicators to evaluate the potential of the investment instruments they intend to invest in.
Conclusion
On 5 August the Ethereum price dropped to its 8-month level. Although the main reason for the price plunge was not evident, there are indications that some crypto firms transferred much ETH onto exchanges. However, the market expects the ETH price to rise due to several factors such as the Federal Reserve interest rate cut.