3 reasons why Ethereum price can’t break $2K

    2023.10.09 | exchangesranking | 1746onlookers

    The price of Ethereum’s native token, Ether (ETH), has gained around 35% in 2023 so far. But its attempts to break above $2,000, a psychological resistance level, have witnessed strong bearish rejections multiple times.

    ETH/USD daily price chart. Source: TradingView

    Cointelegraph takes a closer look at the three likely reasons why Ethereum price has failed to decisively retake $2,000 since May 2022.

    Ethereum price paints bear cycle fractal

    Ethereum’s inability to cross above $2,000 in 2023 resembles the bearish rejection near $425 from 2018 to 2019.

    ETH/USD weekly price chart. Source: TradingView

    In both cases, Ether appears to be in a recovery phase while eying close above its 0.236 Fib line of the Fibonacci retracement graph.

    From 2018 to 2019, the 0.236 Fib line was near $425 and was instrumental in limiting Ether’s recovery attempts. In 2023, the same line is near $2,000, enforcing itself again as a selling area and, thus, pressuring ETH’s price lower.

    Stronger U.S. dollar, Bitcoin

    A strengthening United States dollar has dampened demand for Ethereum in recent months, thus reducing its ability to close decisively above $2,000.

    The prevailing negative correlation between top cryptocurrencies and the dollar has been the main culprit. In 2023, in particular, the weekly correlation coefficient between Ether and the U.S. Dollar Index (DXY) has been consistently negative, as shown below.

    ETH/USD and DXY weekly correlation coefficient chart. Source: TradingView

    Meanwhile, Ethereum has largely underperformed Bitcoin in 2023 due to the ongoing spot Bitcoin ETF hype. For instance, the widely-tracked ETH/BTC pair is down 20% year-to-date. 

    ETH/BTC daily price chart. Source: TradingView

    Additionally, the net capital held by Ethereum-tied investment funds has dropped by $114 million so far in 2023, according to CoinShares’ weekly report. In comparison, Bitcoin-based funds have attracted $168 million in the same period.

    Related: Time to ‘pull the brakes’ on Ethereum and rotate back to Bitcoin: K33 report

    Ethereum network activity dips

    The total value locked (TVL) across the Ethereum ecosystem has dropped from 18.41 million ETH to 12.79 million ETH so far in 2023. That underscores a reduced availability of funds, resulting in lower yields for investors, as JP Morgan analysts also warned recently.

    Ethereum TVL since 2019. Source: Defi Llama

    The declining TVL has accompanied a drop in the Ethereum network’s gas fees, which reached a yearly low on Oct. 5.

    Ethereum’s NFT volumes and unique active wallets have also dropped by 30% and 16.5% in the last 30 days, according to DappRadar.

    That includes declines in the key metrics of popular apps, including decentralized exchange Uniswap v2, DEX aggregator 1inch Network, Ethereum staking provider Lido and others.

    Ethereum technical analysis

    Ethereum price technicals meanwhile show a potential rebound toward its 50-day exponential moving average (50-day EMA; the red wave) near $1,665.

    However, looking broadly, ETH/USD has been paining a bearish continuation pattern called an ascending triangle.

    As a result, a break below the triangle’s lower trendline risks crashing the price by as much as the pattern’s maximum height. In this case, ETH’s price can drop to $1,465 and $1,560 in October 2023, depending on the breakdown point.

    ETH/USD daily price chart. Source: TradingView

    In the short term, a break above the 50-day EMA could have ETH’s price rise toward the triangle’s upper trendline near $1,730 in October 2023, coinciding with the 200-day EMA (the blue wave).

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