The Ethereum (ETH) network has closely mirrored Bitcoin’s price movements this year, despite varying returns. On a weekly timeframe, Ethereum’s bullish outlook is reinforced by a golden cross between the 50 and 200 Moving Averages (MA), following a brief death cross last month. As technical analysis suggests a potential rally in the coming weeks, the fundamental factors within the on-chain Ethereum ecosystem present a different narrative.
On-chain Ethereum Fundamental Factors Tell a Different Story:
Ethereum, a leading digital asset with a market capitalization exceeding $222 billion, is heavily influenced by both fundamental aspects and the speculative nature of crypto assets.
The Ethereum network has played a dominant role in the smart contract and DeFi market through its technological innovations. However, market data from Defilama reveals a decline in Ethereum’s total value locked (TVL) throughout the year. Presently, Ethereum’s TVL stands at approximately $26.16 billion, with stablecoins accounting for about $69 billion in market capitalization.
Furthermore, Ethereum’s network revenue has been steadily decreasing and currently sits below 1,000 ETH per day. This decline in network revenue indicates a dwindling on-chain activity in the DeFi sector recently.
Red Economic Alert Ahead
The decrease in Ethereum network activity coincides with a gloomy global economic outlook, as highlighted by economists. HSBC Asset Management, a British banking giant, warns of recession signals flashing red in many economies, while fiscal and monetary policies seem disconnected from stock and bond markets.
Gita Gopinath, the first deputy managing director of the International Monetary Fund, emphasizes the need for central bankers to continue implementing monetary tightening policies, including higher interest rates, to combat inflation.
While technical analysis points to a potentially bullish future for Ethereum’s price, the fundamental factors within the on-chain Ethereum ecosystem raise concerns. The decline in total value locked and network revenue reflects a decrease in DeFi activity, occurring amidst a challenging global economic landscape. As Ethereum continues to navigate these complexities, market participants will closely monitor both technical and fundamental indicators to gain insights into its future trajectory.
