- Massive influx of ETH into exchanges as ICO continues to sell off
- Dencun upgrade saw ETH lose revenue to L2
Ethereum (ETH), the second largest cryptocurrency in the market after Bitcoin (BTC), has seen increasing selling pressure recently. Especially as traders move ETH to exchanges.
At press time, more than 108,000 ETH, worth approximately $259.2 million, had been sent to exchanges in just 24 hours.
Such an influx often indicates a potential decline in the price of ETH. This is because higher supply, combined with stagnant demand, tends to drive prices down.
Source: Ali/X
Additionally, a participant in the Ethereum Initial Coin Offering (ICO) has been regularly selling ETH lately.
Recently, they sold 6,000 ETH worth $14.11 million, bringing the total to 40,000 ETH sold since September 22, 2024. These sales were made at an average price of $2,525.
Despite these transactions, the ICO participant still holds 99,500 ETH, valued at approximately $238 million, indicating potential selling pressure in the future.
Source: Lookonchain
ETH Price Performance Compared to Other Assets
ETH has also underperformed compared to other risk assets like Bitcoin and the S&P 500.
While BTC saw a slight decline of 0.32% and the S&P 500 saw a positive move of 3.63%, ETH fell by 26% over the past three months.
Total fees on the Ethereum network also decreased by 43.9%, reaching $247.6 million. Falling fees contribute to Ethereum’s struggles. Over the past quarter, on-chain activity on Ethereum mainnet has also declined.
Source: In the block
The impact of Dencun upgrade
The Dencun upgrade also played a role in Ethereum’s underperformance. This update, which included EIP 4844, reduced Layer 2 (L2) transaction costs by more than 10x, leading to a boom in L2 activity.
As a result, ETH mainnet fees plummeted, reaching an all-time low. This affected the amount of ETH burned, making the cryptocurrency inflationary again after following a deflationary trajectory.
Source: In the block
The summer lull and sideways trading in traditional markets sent on-chain fees to their lowest level in several years. Lower fees and less ETH burned are similar to a company facing declining revenue and stopping stock buybacks. With these changes, it is no surprise that the ETH price has struggled.
Additionally, the long-term benefits that ETH can gain from L2 miner extractable value (MEV) are still uncertain.
Influence of L2 on ETH and the rise of optimism
Finally, Optimism (OP), one of the leading layer 2 networks on Ethereum, saw its governance token outperform others.
In Q3, the OP/ETH pair rose 28%, benefiting from greater on-chain activity on L2s, meaning it is outperforming Ethereum.
The rise in optimism, in part due to Coinbase’s L2 running on the Optimism superchain, highlights the growing dominance of L2s. This continues to affect the value of Ethereum.
Source: In the block
