- Ethereum’s primary value is driven by asset speculation, according to CoinShares.
- Ethereum ETFs saw a surge with net inflows of $62.5 million on Tuesday, marking their highest since August 6.
- Ethereum risks dropping to $2,395 after breaking a crucial support level.
Ethereum (ETH) is facing potential risks as it drops over 2% on Wednesday. CoinShares’ latest report highlights that token transfers and asset speculation are pivotal value drivers for Ethereum. Moreover, the recent Mainnet upgrade has introduced complexities to its Layer 1 (L1) platform and economic model.
Ethereum’s Key Value Drivers Show Mixed Signals
CoinShares’ recent report elaborates on what propels Ethereum’s value. It emphasizes that token transfers, predominantly involving ETH and stablecoins, are crucial drivers for the network.
“This underscores the importance of ETH as the native asset for the Ethereum network, as well as the critical role stablecoins play,” stated CoinShares analyst Matthew Kimmell.
Kimmell further explains that while Ethereum generates over a billion dollars annually in user fees, many activities within its ecosystem focus mainly on asset speculation.
Ethereum Fee Spend
The report also indicates that Ethereum’s emphasis on Layer 2 (L2) scaling solutions could be cannibalizing its Layer 1, complicating its relationship with ETH.
“The latest major update, EIP-4844, which incentivized Layer-2s, has contradicted the economic benefits of EIP-1559,” explained Kimmell. “This has tied ETH’s value to the Layer 1 platform’s demand.”
In the meantime, Ethereum ETFs marked a significant inflow of $62.5 million on Tuesday, their highest since August 6. BlackRock’s ETHA recorded the majority of these inflows, with over $59 million, while Grayscale’s ETHE had zero net flows.
Is Ethereum Facing a Dip to $2,395?
Ethereum currently trades around $2,570, having declined over 2% on Wednesday. In the last 24 hours, it experienced $15.05 million in liquidations, with long and short liquidations making up $10.15 million and $4.9 million, respectively.
On the 4-hour chart, Ethereum broke a critical support level at $2,595, which may lead it down to $2,395 if it doesn’t rebound from the 50-day, 100-day, and 200-day Simple Moving Averages (SMAs).
ETH/USDT 4-hour chart
The Relative Strength Index (RSI) momentum indicator has fallen below its neutral level, with the Stochastic Oscillator situated in the oversold territory.
Ethereum FAQs
Ethereum is a decentralized open-source blockchain known for its smart contracts functionality. As the foundation for the Ether (ETH) cryptocurrency, it ranks as the second-largest crypto and largest altcoin by market cap. It is designed for scalability, programmability, security, and decentralization, which attract developers.
Utilizing decentralized blockchain technology, Ethereum allows developers to build and launch decentralized applications (dApps). It features a programming language that helps users create smart contracts, self-executing contracts verified on the blockchain, facilitating transactions among users.
Staking involves locking assets for a specified period instead of selling them to grow a portfolio. It is popular among blockchains using the Proof-of-Stake (PoS) mechanism, where users receive rewards as incentives for committing their tokens. For long-term holders, staking can provide passive income, utilizing dormant assets.
Ethereum’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) in “The Merge” aimed to enhance security, reduce energy consumption by 99.95%, and introduce new scaling solutions, potentially reaching 100,000 transactions per second. The switch to PoS reduces energy demands, lowering barriers for miners.