Despite A 20% Drop In Ethereum's Price Over The Past Week Investors Remain Bullish On The Cryptocurrency

With a 20% decline in ETH price over the last week, futures data indicates that investors still have faith in the bullish trend.

Source: money.com

Between March 3 and March 13, Ethereum's price surged by 20%, reaching a double top formation of around $4,100. However, after facing rejection for the second time, ETH underwent a 20% correction, testing the $3,200 support level on March 19. Analysts attribute the initial rally to excessively leveraged long positions. The bullish momentum of Ether waned as a result of the forced liquidation of $375 million in ETH futures over the past week. Nonetheless, there's uncertainty about whether this event is adequate for Ethereum to halt its correction and potentially initiate another bullish trend.

During The Crash Ether's Price Lagged Behind Its Competitors

Ether's performance was more severely impacted compared to the broader cryptocurrency market. The market capitalization of the entire cryptocurrency market peaked at $2.77 trillion on March 14 but stabilized at around $2.35 trillion after a 15.5% drop over five days. Ether's relative performance suffered due to Bitcoin's 12% weekly drop, and Solana's 21% increase. Interestingly, Solana encountered challenges related to increased fees and failed transactions as the network struggled to handle the surge in activity, primarily driven by the significant interest in new memecoins. Within just three days, traders injected approximately $100 million into new Solana memecoins, as reported by Cointelegraph.

On March 13, Ethereum underwent its most significant upgrade in over a year, coinciding with Ether's price peak for the cycle in 2024. The recent hard fork notably slashed transaction fees for layer-2 networks like Arbitrum, Optimism, and Base, thereby bolstering Ethereum's scalability. Additionally, the introduction of data blobs has enhanced the network's data-handling capabilities. The success of this upgrade is evident from the surge in activity on layer-2 solutions, which hit an all-time high averaging 122 transactions per second (TPS) over the last two days, according to L2beat. This marks a 31% increase from the previous week and is more than eight times the base layer capacity of Ethereum at 15 TPS.

Despite the anticipation surrounding Ethereum's network upgrades, base layer gas fees have remained a significant concern, with the average cost hovering around $12 on March 18, as reported by BitInfoCharts. This situation underscores the continued appeal of alternative platforms like Solana and Avalanche, which were among the few cryptocurrencies in the top 20 to see gains over the past week. 

It is important to note that as ETH futures were forced to liquidate last week, their funding rate dropped to a three-week low of 0.014% per 8-hour period. This represents a 0.3% decrease over seven days, marking a significant change from the previous week's trends. This funding rate, though small, is not near zero; it suggests that demand between long and short sellers is becoming more balanced, potentially stabilizing Ether's price in a more balanced market. Moreover, the market's optimism regarding the approval of the Ether Spot ETF is viewed as an additional sign that Ether's price may soon rise.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.