Ethereum suffers a divergence between foundations and price
The price of Ether (ETH), the native cryptocurrency of the Ethereum Network, is telling a different story than its ecosystem lives.
The ETH contribution is 43% below its historical maximum (ATH) of $ 4,890 reached in 2021. This contrasts with the growing institutional fever by ETH, the development of solutions such as pein and the advances in the regulatory plane that could change their panorama in the coming months.
The following trainingview shows how ETH behaved since 2021:
To understand this disconnection between price and fundamentals, each of these factors should be reviewed in detail.
As Cryptonoticia already reported, More and more companies are issuing debt through shares or convertible bonds to finance eth purchases. It is a strategy similar to that implemented by Strategy, the firm that leads Michael Saylor, with the difference that purchases are from Ether and not Bitcoin (BTC).
The objective of these firms is to generate an income not only by revaluation of ETH, but also through staking. To mention a case, Sharplink (SBET), a firm specialized in bets that quotes at Nasdaq, reported that it obtained 322 ETH through this mechanism, the equivalent of $ 850,000 at current prices.
Another issue to highlight is that more than 1.3 million ETH are in the hands of entities, companies and governments. This level of accumulation also reinforces ETH narrative as a reserve asset.
And this interest in ETH is complemented by the development of technical updates in Ethereum as a sirty, which was completed on May 7. This 11 proposals package was designed to enhance the scalability of layer 2 (L2) solutions, improve interaction with users and the experience of validators.
Since the tong update, Ethereum’s dominance in the decentralized finance market climbed up to 56%. S deals with a recovery signal and shows that “Ethereum Killers” (Ethereum murderers, in Spanish), have not yet managed to fulfill their purpose: “kill” the network created by Vitalik Butein.
The term “Ethereum Killers” He groups the projects, such as Solana or Cardano, who have stood out for their goal of providing a faster, scalable network with lower rates than Ethereum. However, They have not been able to overcome Ethereum, who has a community of consolidated developers, greater liquidity and more robust protocols.
Regulatory novelties
To this is added the expectation that Ether’s listed funds (ETF) incorporate the staking mechanism. Fidelity and 21Shares are some of the fund managers who submitted this order to the Bag and Securities Commission (SEC) so that their financial instruments offer this option that allows generating extra income.
Although still the organism that Paul Atkins leads did not give an answer, there is a fact that feeds expectations: On July 2, an ETF of Solana (Sun) debuted with Staking. Although it is an ETF that operates in the derivative market, it is an antecedent that could indicate a change of regulatory course.
On the other hand, the approval of the Law on Orientation and Establishment of National Innovation for Stablecoins, better known as Genius Law, can promote Ethereum’s activity. This is because the network is currently the main “home” of Stablecoins and has sufficient capacity to add new projects.
According to a report by Node Analytica Research, the approval of the Genius law could promote significant growth in the Stablcoins market, with a projection that the total volume reaches 4 billion dollars by 2030, multiplying by 15 the current level.
This growth represents a key opportunity for Ethereum, which already houses about 49.6% of the stablecoins in circulation, with an approximate value of 126,000 million dollars, according to defillma data. The consolidation of this ecosystem positions Ethereum as a central actor to channel much of the future expansion of stable currencies.
Why don’t Ether’s price upload?
Thus, this divergence between foundations and price raises the following question: Is the market underestimating ETH?
For Arnau Pintó, financial market analyst, the answer is that there is a market manipulation. “Why don’t we see ETH over 3,000 or $ 3,200? Market Makers They are intervening to lower their price. ”
The Market Makers (Market creators, in Spanish) are entities or individuals that provide liquidity to the market. Its main function is to ensure that there are always available buyers and vendors, which facilitates operations and reduces volatility. Therefore, these actors have the capacity to manipulate the address of the price of an asset, in this case, ETH. It is worth clarifying that what he says is just an assumption of his and he explains that he ignores why Market Makers They would do such a thing. But, despite being an assumption, it is a possibility that cannot be ruled out.
The following graph shows the net exposure of the funds leaned in cash on ETH, according to data from the United States Basic Future Trade Commission (CFTC), the agency that regulates the markets of futures and financial derivatives.
Each bar represents the difference between long positions (Long) and short (short), and a clear domain of short positions (red bars) is observed since 2022, with a pronounced fall that reaches more than 11,000 negative contracts. This indicates A strong bearish pressure exerted by these funds in recent months.
As explained by Pintó, this dynamic suggests a possible market manipulation. Anyway, for him, neither the centralized exchanges (CEX) nor the Market Makers They are interested in the price to continue falling indefinitely, so they could be generating this pressure temporarily.
In their opinion, the time comes, they will reduce that bearish pressure and even remove liquidity from the book of orders to facilitate a price increase.
Let this cause or others, the truth is that The market seems to move in another direction to that of the foundations of Ethereum. But it seems clear that it will only be a matter of time for Ethereum to fully reflect its true potential in the price of the eth cryptocurrency.
Discharge of responsibility: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of cryptootics. The author’s opinion is informatively and under no circumstances constitutes an investment recommendation or financial advice.
