The price of Ethereum’s native token, Ether (ETH), has experienced a 35% increase in value in the year 2023. However, it has struggled to break above the $2,000 mark, which is seen as a psychological resistance level. Let’s explore the three main reasons behind Ethereum’s failure to surpass this level.
One possible reason is the resemblance between Ethereum’s current situation and its bearish rejection near $425 in 2018-2019. In both cases, Ether appears to be in a recovery phase, attempting to surpass its 0.236 Fib line on the Fibonacci retracement graph. Back in 2018-2019, the 0.236 Fib line acted as a selling area and prevented Ether’s recovery. Similarly, in 2023, this line is near $2,000 and is once again acting as a resistance level, pushing Ethereum’s price lower.
Another factor affecting Ethereum’s ability to break above $2,000 is the strengthening U.S. dollar. The negative correlation between top cryptocurrencies and the dollar has played a significant role in dampening demand for Ethereum. This negative correlation has been consistently observed throughout 2023, as shown in the weekly correlation coefficient chart between Ether and the U.S. dollar index (DXY). Additionally, Ethereum has underperformed Bitcoin due to the ongoing hype surrounding a Bitcoin ETF. The ETH/BTC pair is down 20% year-to-date, indicating a preference for Bitcoin over Ethereum.
Furthermore, the decline in Ethereum network activity has contributed to its inability to surpass $2,000. The total-value-locked (TVL) across the Ethereum ecosystem has dropped significantly in 2023, resulting in reduced availability of funds and lower yields for investors. This drop in TVL has also caused a decrease in Ethereum’s gas fees, reaching a yearly low in October. Moreover, Ethereum’s NFT volumes and unique active wallets have seen a decline in the last 30 days, indicating a decrease in user activity.
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From a technical analysis perspective, Ethereum’s price chart suggests a potential rebound towards its 50-day exponential moving average (50-day EMA) near $1,665. However, the broader picture reveals a bearish continuation pattern known as an ascending triangle. If the price breaks below the triangle’s lower trendline, it could result in a significant drop in price, potentially reaching $1,465 and $1,560 in October 2023.
On the other hand, a break above the 50-day EMA could lead to a rise in Ethereum’s price towards the triangle’s upper trendline near $1,730. This level coincides with the 200-day EMA (the blue wave) and could act as a resistance level.
In conclusion, Ethereum has faced significant challenges in its attempt to surpass the $2,000 mark in 2023. The resemblance to its previous bearish rejection, the strengthening U.S. dollar, and the decline in network activity have all contributed to this struggle. Additionally, technical analysis suggests potential support and resistance levels for Ethereum’s price movement in the near term. As with any investment, it is important for individuals to conduct their own research before making any decisions.
