Ether (ETH) has experienced a modest recovery in 2023, with a year-to-date increase of 36% in its price when measured in USD. However, it is important to note that ETH is still trading 66% below its peak of $4,870 in November 2021. This decline has raised concerns among ETH investors, especially as Ether reached its lowest levels against Bitcoin (BTC) in 14 months, breaking the critical 0.06 BTC support on September 20.
One of the main factors that ETH buyers were banking on was the protocol upgrades that aimed to reduce the need for new coin issuance as Ethereum transitioned to a proof-of-stake consensus mechanism. In mid-September 2022, these hopes were realized, resulting in an annualized issuance rate of only 0.25% of the total supply. This transformation aligned with the Ethereum community’s vision of “ultrasound money.” Additionally, the subsequent Shapella upgrade on April 12 addressed concerns by allowing withdrawals from the native staking protocol, which had previously locked up deposits and yields indefinitely.
The successful implementation of these upgrades boosted confidence among Ethereum enthusiasts, and their optimism led to the prediction that the price of Ether would surpass $2,000, which came true on April 14. However, this optimism was short-lived as the price promptly fell back to the same level of around $1,850 just a week later. Despite this volatility, Ethereum staking still experienced a net inflow of 3.1 million ETH in the 30 days following the Shappela upgrade, exceeding even the most optimistic expectations.
While the planned developments for the Ethereum network have generally been on track, it is crucial for investors to explore other potential catalysts that could reverse the current downtrend in Ether’s price relative to BTC. One significant factor is the ongoing legal battle between Ripple and the U.S. Securities and Exchange Commission (SEC). The outcome of this battle could have a significant impact on Ether’s price momentum. The SEC argues that XRP sales to retail investors constitute a securities offering, but in July, a judge ruled that XRP generally does not qualify as a security under SEC guidelines, especially when distributed through exchanges.
Related Post
Bryan Jacoutot, an American lawyer and Bitcoiner, has raised concerns about the Ethereum Foundation’s exposure due to the presale of ETH directed toward institutional investors and subject to a lock-up period. Jacoutot suggests that even if Ripple secures a favorable outcome, it would not immediately eliminate the risks for Ethereum. The regulatory uncertainty surrounding the Ether initial coin offering (ICO) remains a source of concern for investors.
Recent movements in Ethereum addresses associated with the ICO era have further amplified regulatory concerns. On September 20, an Ethereum address associated with the ICO era showed its first activity by transferring 32.1 ETH to Coinbase. Similarly, an address linked to Vitalik Buterin sent 300 ETH to the Kraken exchange on September 19. These movements raise questions about the motivations behind these transactions, especially considering there are no apparent incentives for addresses that have remained dormant for several years to divest at this particular point in the market cycle.
Despite these challenges, Ethereum has also seen positive news that gives hope to investors. For instance, ARK Invest and 21Shares unexpectedly filed for a spot Ether exchange-traded fund on September 6. If approved, this could reduce the risks associated with excessive institutional concentration in Bitcoin. Additionally, Canto, a Cosmos-native blockchain, announced its expansion to Ethereum’s layer 2 on September 18. This development aims to bring traditional finance into the Ethereum ecosystem and further enhances Ethereum’s position if Bitcoin’s price surge is driven by the approval of a spot Bitcoin ETF or inflation concerns in the United States.
In the decentralized applications sector, Ethereum’s primary competitors, Solana and BNB Chain, face similar risks related to ICO and securities regulations, making it unlikely for them to challenge Ethereum’s dominance in terms of total value locked and trading volumes.
In conclusion, while Ether has experienced a modest recovery in 2023, it is still trading significantly below its November 2021 peak. The ongoing legal battle between Ripple and the SEC, as well as regulatory uncertainties surrounding Ethereum’s ICO, remain important factors that could impact Ether’s price momentum. However, recent positive developments, such as the filing of a spot Ether ETF and the expansion of Canto to Ethereum’s layer 2, provide hope for Ethereum investors. Ultimately, the crypto market will continue to evolve, and it will be essential to monitor these external factors and catalysts that could influence Ether’s price movement.
