Ether price – the native token of Ethereum, has surged 35% in 2023; however, it still fails to surpass $2,000 threshold. Here are 3 potential causes:
Ether cycle repeats
Ethereum’s inability to surpass $2,000 in 2023 is similar to the period of 2018-2018 when it struggled at $425. In both cases, Ether appears to be in recovery phase while eying close above its 0.236 Fib line of the Fibonacci retracement graph. In 2023, the same line is close to $2,000, enforcing itself again as a selling area and pressuring ETH’s price lower.
Strength of US dollar and Bitcoin increased
The strengthening US dollar has reduced demand for Ethereum in recent months, thereby reducing the token’s ability to reach $2,000. The negative correlation between the leading cryptocurrency and the dollar is the main culprit. In 2023, the weekly correlation coefficient between Ether and the US Dollar Index (DXY) is consistently negative.
Meanwhile, Ethereum has largely underperformed Bitcoin in 2023 due to the hype surrounding the Bitcoin spot ETF. For example, the ETH/BTC pair is down 20% year to date.
According to CoinShares weekly report, net capital held by Ethereum-tied investment funds has decreased by $114 million through 2023. Meanwhile, Bitcoin-based funds have attracted $168 million during the same period.
Activities on Ethereum network drop
Total value locked (TVL) across the Ethereum ecosystem has dropped from 18.41 million ETH to 12.79 million ETH through 2023. That means available capital is reduced, leading to lower yield for investors.. The decrease in TVL led to a drop in Ethereum network gas fees, reaching a yearly low on October 5.
According to DappRadar, Ethereum’s NFT volume and unique active wallets have also decreased by 30% and 16.5% over the past 30 days. This includes the decline of popular applications such as decentralized exchange Uniswap v2, DEX aggregator 1inch network, Ethereum staking service provider Lido, and others.