Crypto: Why the Ethereum Rebound Might be Slower than Expected?

Ether (ETH) price recently hit its lowest level in eight months. This marked decline raises concerns about a recovery that could take longer than expected.

Catalysts Behind Ether’s Decline

On August 5th, ether’s price plunged to a floor of $2,100. A 22% drop marking the altcoin’s largest one-day decline since May 2021. This rapid decline is primarily attributed to various strategic and macroeconomic moves, including a notable transfer of $315 million worth of ETH by Jump Trading to exchanges.

This transaction was seen as a precursor to an imminent liquidation of their positions. Moreover, the crypto market sentiment was dampened by escalating geopolitical tensions and growing worries about a global recession. These factors led to massive corrections across financial markets, further putting pressure on ether.

Crypto Asset Recovery: A Rocky Path

ETH’s debacle has affected Ethereum investment products, leading to significant capital outflows. According to a CoinShares report dated August 5th, crypto investment funds saw their first net outflows after four weeks of inflows. Investors withdrew over $528 million during the week of August 3rd.

Meanwhile, Ethereum’s on-chain activity shows a decline. The number of active and new addresses on the blockchain decreased, according to data from The Block. Between July 27th and August 3rd, it dropped from 93,840 to 82,540. Daily transactions on the network also decreased, from 1.17 million on July 6th to 1.11 million on August 4th. This decline in metrics comes after the recent launch of Ethereum spot ETFs in the United States. This suggests that some investors prefer to gain exposure to ether through funds rather than by directly purchasing the crypto asset.

Currently, ETH is striving to break the $2,500 mark. However, the outlook for a swift price recovery of the crypto asset remains uncertain. Some analysts even foresee the asset falling to $2,000. In short, the road to recovery could be long.