3 metrics suggest that Ethereum (ETH) price downside is not over

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After rallying to $3,972 after the approval of spot Ethereum exchange-traded funds (ETFs), Ether (ETH) has underperformed over the last week, down 10%, compared to Bitcoin and the broader crypto market, leading traders to doubt whether the altcoin’s downtrend is over.

To put this into context, Bitcoin’s (BTC) price fell by 6% during the same period, while the total cryptocurrency market capitalization dropped by 5.3%.

A number of market and technical indicators show that ETH may witness a deeper correction before making another attempt at recovery.

ETH//USD daily chart. Source: TradingView

The ETH/BTC ratio trended lower over the last week

Ether has been down 10% over the last seven days, underperforming Bitcoin and other top layer 1 tokens. BTC price has dropped 5.5% over the last week, with the ETH/BTC ratio dropping 5.21% from 0.055 on June 3 to 0.0513 on June 11, its lowest since May 20.

ETH/BTC ratio. Source: TradingView

Currently, there are a handful of reasons for ETH’s underperformance, including Bitcoin-specific factors in 2024. U.S. spot Bitcoin ETFs have largely been a success seeing almost $2 billion in capital inflows last week. In addition, the upcoming CPI reading and FOMC meeting decision on rate cuts has preceded a notable market correction over the last few months, affecting all crypto prices including Ether’s.

Moreover, there has been a decline in Ethereum’s network activity (in specific metrics) over the last 90 days. Data from Glassnode reveals that daily active addresses on the Ethereum network Ethereum have dropped from 622,963 addresses on March 20 to 458,400 on June 10. There has been a 1.2% decrease over the last 48 hours alone.

Number of active addresses on Ethereum. Source: Glassnode

Although Ethereum remains the network to beat in the layer 1 sector, Solana has recently captured its market share in this segment regarding on-chain activity. According to data from DappRaddar, Ethereum’s NFT volume has decreased by 9% over the last seven days to 105 million.

The figure below shows that the Ethereum network trails Solana and the BNB Chain in total UAWs. More than 524,000 million UAWs have interacted with the protocol, a 4.5% decrease over the last seven days. This is much lower than the 2.7 million UAWs on Solana, which has increased 74% over the same timeframe.

Top layer-1 blockchains. Source: DappRadar

Decreasing on-chain activity suggests a waning demand for Ether within the ecosystem, which weighs down on its price.

Related: Munchables hacker returns $62.8M Ether without ransom

Ether faces stiff resistance on the upside

Ether’s latest drawdown saw it lose a critical support level around the $3,500 demand zone, flipping it into resistance. Past price action has indicated that this area presents a stubborn resistance for ETH bulls. A recent drop below this level on April 11 resulted in a 25% drop to a low of $2,814, reached on May 2.

Data from IntoTheBlock reinforces the significance of this resistance zone. Its In/Out of the Money Around Price (IOMAP) model reveals that this area is within the $3,476 and $3,577 price range, where roughly 2.6 million addresses previously bought approximately 1.08 million ETH.

Ethereum IOMAP chart. Source: IntoTheBlock

If this resistance level sees a high volume of activity from the sellers in the short term, Ether’s price is expected to sink deeper.

Ether’s market setup points to continued downtrend

After reaching a six-week high of $3,973 on May 27, ETH price pulled back as bears booked profits and the broader crypto market corrected. The price has since dropped 12% to the current price of $3,511

Despite the recovery, a long bearish candlestick can be seen on the daily chart, which hints at the intensity of the downtrend.

ETH//USD daily chart. Source: TradingView

Ether bulls are counting on immediate support from the $3,400 psychological level. A daily candlestick close below this level would signal the inability of the bulls to defend this it, projecting a decline to $2,840. Such a move would represent an 18% descent from the current price.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.