Ethereum (ETH) price reclaimed the $2,000 support level on March 24, but it remains 18% below the $2,500 mark seen just three weeks prior. Recent data indicates that Ether has underperformed the broader altcoin market by 14% over the past month, prompting traders to evaluate whether ETH can regain its bullish momentum and identify the factors that may catalyze a trend reversal.
Ethereum appears well-positioned to attract institutional investment, while also working to alleviate lingering fears and doubts (FUD) that have stunted its growth potential. There have been longstanding criticisms claiming that the Ethereum ecosystem falls short compared to its competitors in terms of user experience and base-layer scalability, which have adversely affected network fees and transaction efficiency.
Impact of the Upcoming Ethereum Pectra Upgrade
The Ethereum network’s challenges are expected to be addressed in the forthcoming Pectra network upgrade, scheduled for late April or early June. Among the proposed changes is a doubling of the data capacity per block which could help lower fees for rollups and privacy-focused solutions. Moreover, the cost of call data is set to rise, incentivizing developers to utilize blobs—a more efficient method for data storage.
Another significant enhancement in this upgrade includes the introduction of smart accounts, allowing wallets to operate similarly to smart contracts during transactions. This new functionality will facilitate gas fee sponsorship, passkey authentication, and batch transactions. Additional upgrades will focus on improving staking deposit and withdrawal processes, enhancing user flexibility, and extending block history for smart contracts reliant on past data.
Arthur Hayes, co-founder of BitMEX, has set an ambitious price target of $5,000 for ETH, indicating it is expected to significantly outperform competitor Solana (SOL). However, it is worth noting that Ethereum options traders carry a more cautious outlook, as evidenced by the low costs associated with call options, suggesting that the market does not share the same optimistic sentiment.
Ethereum’s Total Value Locked and ETH Supply Dynamics
Currently, Ethereum boasts a total value locked (TVL) of $52.5 billion, far exceeding the $7 billion held by Solana. Notably, deposits on the Ethereum network saw a 10% increase over the last 30 days, reaching 25.4 million ETH, while Solana experienced an 8% decrease in the same timeframe. Highlights include a 17% increase in deposits from Sky (formerly Maker) and a remarkable 38% surge in Ethena’s TVL.
As of March 25, the Ether supply on exchanges stood at 16.9 million ETH, a figure that is merely 3.5% above its five-year low. This trend suggests a departure of investors from exchanges, indicating a long-term commitment to the asset. Similarly, flows into spot Ether ETFs saw relatively low activity despite substantial outflows in recent weeks, reflecting a cautious market posture.
Moreover, Ethereum is gaining traction in the Real World Asset (RWA) sector, driven in part by the success of the BlackRock BUILD fund, which has surpassed $1.5 billion in capitalization. The Ethereum ecosystem, inclusive of its layer-2 scaling solutions, dominates over 80% of this burgeoning market.
While Ether experienced a dip below $1,900 on March 10, likely linked to overly pessimistic market expectations, the network has shown resilience and the shift in investor behavior suggests that the groundwork is being laid for a possible rally toward the $2,500 mark.
This article is for general information purposes and is not intended to be taken as legal or investment advice. The views expressed here reflect the author’s own perspective and do not necessarily represent the views of Cointelegraph.
