Ethereum’s recent upgrade, Dencun, promised to accelerate its performance and reduce costs. However, the price of Ether did not receive the memo and instead took a sharp decline. It’s like planning a grand entrance at a party and then tripping at the doorstep.
The price behavior of Ether after the upgrade resembled the old saying “buy the rumor, sell the news.” The cryptocurrency initially rallied, surpassing the $4,000 mark for the first time since December 2021. However, by the end of the week, Ether had lost 7.5% of its value.
According to CryptoQuant, Ethereum was pricing itself as if it were the snobbiest it had been since its peak in 2021. On the day of the upgrade, the market value to realized value (MVRV) ratio for Ether was at a high 2.0. In simpler terms, Ethereum was twice as expensive as what the average investor paid for it, resulting in unrealized gains of up to 50%. The upgrade itself was not to blame for Ether’s decline, as the network was already active and the supply of Ether was decreasing, reaching its lowest point since August 2022.
The technical aspects of Wednesday’s upgrade were impressive, with network activity and supply dynamics showing positive signs. The total supply of Ether decreased just before Ethereum’s transition to proof-of-stake, known as the “Merge.” The high level of transactions led to increased fees and a reduction in the supply of Ether. This scarcity tactic is something long-term Ether investors are banking on, hoping that these network upgrades will make Ethereum stand out among its competitors.
Despite the promising outlook for Ether in 2024, with a 60% gain and the possibility of spot Ether ETFs being approved in the US, the price of Ether took a tumble and failed to reach the $4,000 mark.
Currently, Ether is trading at $3,574, which is not an impressive figure, and its market cap has been affected. Bitcoin, on the other hand, managed to recover over the weekend, leaving Ether in a less favorable position. However, there is still hope, as 89% of Ether holders are still in a profitable position, demonstrating resilience in the face of market uncertainties.
Analyzing the on-chain data, it is evident that the $3.7K mark is a significant resistance level, with a large number of Ether addresses holding substantial amounts at that price. This can be compared to a financial stronghold, indicating a strong barrier for price increases. As market observers analyze support and resistance levels, the $4,000 mark remains a psychological hurdle to overcome.
On the charts, Ether is struggling to surpass the $3,700 mark and the 100-hourly Simple Moving Average. Resistance is strong around $3,650, and Ether faces a challenge to overcome bearish sentiments. Looking ahead, if Ether manages to break through these obstacles, we may see a rally towards $3,925 and a potential flirtation with the $4,000 resistance level again.
On the other hand, if Ether fails to gain strength and break through the resistance, we may see a retreat to lower levels, with support levels at $3,520 and $3,500. If bearish sentiment intensifies, Ether could find itself in a more difficult position, possibly experiencing further declines.
