Ethereum remains firmly established at $2K, showing consolidation.

Ethereum has been going through a rough patch over the past year, with prices climbing but then continuing to stagnate. This happened after the difficulties of 2022, when values dropped considerably under the effects of the bear market and the subsequent crypto winter. However, October brought in a much-needed surge and gave the market a boost, increasing engagement levels and optimism among users. 2024 is set to be an excellent year for crypto investments, but traders must still be mindful of the possible volatility they could encounter in the ecosystem.

Overview

2023 has been a year of staunch external pressures for the crypto market. First, there was the increased scrutiny brought by the troubles that rocked several notable exchanges. Fraudulent activities were often connected to the higher-ups of the companies, and numerous users ended up losing tremendous amounts of capital. This has made the news and become common knowledge even among those who have never interacted with any crypto.

Next, the regulatory pressures became more intense, causing investors to doubt the reliability of the marketplace. In the United States, the effort to bring cryptocurrencies under a regulatory framework has caused very divided reactions among crypto traders, and while some believe the move is positive and will protect users against problems in the future, others are convinced that this is nothing more than an attempt to make the market centralized.

$2K

The Ethereum price has been struggling to gain the momentum necessary to continue going higher. However, it seems now that the coin will finish 2023 with steady values and walk in 2024 with renewed strength. The support level of around $1,930 has been maintained and consolidated, and ETH is currently growing above $2K. The uptrend can be partially attributed to the improvements occurring in decentralized applications.

Binance remains a leader in Ethereum spot trading volume, making up for 30% of the Ethereum futures open interest. Recently, $2,35 billion worth of Ethereum derivatives contracts have been closed. Typically, the crypto market is vulnerable to these changes, and there are significant consequences that come with large-scale movements. In the beginning, changes in liquidity and spreads appeared minimal, but Binance ultimately witnessed net outflows of around $1.53 billion for roughly two days between November 21st and 23rd.

Investors fear that a drop is still imminent, while others are certain that the market is now strong enough to prevent such events from happening. The regulatory framework is vital to take into consideration here, as there are both opportunities and risks that come with it. While the price is now consolidated, some crypto researchers and advisors have expressed their view that users should remove their coins from exchanges and store them in hardware wallets instead.

Network Health

One of the main reasons investors believe that the marketplace will remain strong is the surge in network activity the environment recorded recently. Compared to earlier in November, there’s a 5% in the total value locked on Ethereum-based decentralized applications. The figures show that there are now $26 billion on the apps. Unfortunately, a hack impacted the dYdX exchange, a fully decentralized platform that provides trading options for nearly forty cryptocurrencies, including Ethereum and Bitcoin, causing a 16% decline in deposits.

The overall market capitalization of Ethereum currently rests at $248 billion, significantly behind Bitcoin’s $728 billion. However, the two generate very similar protocol revenues overall. Between the 17th and the 23rd of November, Bitcoin collected approximately $57.5 million in fees. Ethereum was close behind, at $54.3 million. Ethereum has recently reclaimed its spot as a leader in NFT sales and, between the 22nd and 23rd of November, recorded almost $13 million in transactions. This movement follows a relatively brief but very robust period during which Bitcoin claimed this portion of the market for itself.

Ordinals and Bitcoin

The Ordinals have taken the crypto ecosystem by storm the moment they were launched, overshadowing the NFTs, who had been the first to introduce this technology and functionality into the blockchain. Much has been said about Ethereum’s ability to eventually surpass Bitcoin and establish itself as the new crypto royal. Still, most researchers believe that if this does occur, it won’t be anytime soon.

Ethereum is big, but it still comes second to Bitcoin. At the moment, BTC occupies over half of the entire digital coin market, managing to be at least double in size compared to all other digital currencies. Following this massive tour de force, the idea that any altcoin could replace Bitcoin seems even more far-fetched. Even though Ethereum is extremely popular, Bitcoin is roughly three times higher in terms of value. Its previous market capitalization swelled up, steadily approaching $1 trillion, a staggering sum for an asset class that’s still relatively new compared to well-established options like stocks or real estate.

Ethereum also jumped, going from $145 billion in January to almost $245 billion in November. However, the increased focus on decentralized finance and the renewed interest in NFTs during 2023 have served to boost the interest and engagement rates even further. The introduction of Ordinals switched things up as well. Since its launch, the Bitcoin blockchain has focused solely on transactions, earning the moniker digital gold.

On the flip side, Ethereum has become a forerunner in the development of decentralized technologies outside the simple use of crypto transactions. Following protocols similar to those of NFTs, the Ordinals changed that forever, allowing the creation of digital collectibles on the Bitcoin platform as well. Depending on the day, anywhere between a third to one-half of the BTC transactions contain Ordinals as well, increasing the demand for their blockspace.

This has led to concerns among users that the network isn’t equipped to handle a large influx of Ordinals. NFTs also became the most well-known commodity in crypto for a while, even though they ended up taking the overall utility levels of Ether. Ordinals might cause a similar situation for Bitcoin, particularly if the bull market remains strong. That could allow Ethereum to surpass Bitcoin for a while.

The crypto environment is still recovering after two troublesome years, but it will inevitably bounce back sooner or later. History shows that it always does.