Can Ethereum Crash Soon and What Could Be the Reasons?
Ethereum (ETH) is experiencing a difficult period, with network activity dwindling and major concerns over its price stability.
According to “EgyHash“, Ethereum’s performance has dropped significantly in comparison to Bitcoin, and the network is showing signs of severe strain that could result in a drastic price correction.
One of the key issues facing ETH is the continuous decline in network activity. The number of active addresses has steadily decreased since the beginning of the year, signaling reduced engagement with the platform. As a direct consequence, Ethereum has seen a significant drop in transaction fees, which are a crucial factor for the overall value of the network.
Data from CryptoQuant and on-chain analytics suggest that both the average transaction fee and the average block fee have hit all-time lows. This drop has made Ethereum less profitable for validators, the entities responsible for processing transactions, which further weakens the ecosystem and contributes to a diminished incentive to participate in the network.
Whale Dumping and Reduced Activity
Adding to Ethereum’s woes, a recent report from Santiment reveals that Ethereum whales have sold off a significant portion of their holdings. In just two weeks, approximately 760,000 ETH, worth around $1.42 billion, were dumped into the market. This large-scale sell-off has raised alarms, as it signals a lack of confidence among some of the biggest investors in Ethereum’s future.
Whale activity, in general, has dropped by 63.8% over the past five weeks, a troubling indicator of reduced institutional interest. If this trend persists, Ethereum could face a more significant price correction, with the potential for further sell-offs and an extended period of price stagnation or decline.
Impact of the Dencun Upgrade
The Dencun upgrade, which aimed to enhance Ethereum’s scalability and efficiency, has not had the desired effect on its deflationary mechanism. Ethereum’s fee-burning system, introduced as part of its transition to a proof-of-stake network, was designed to reduce supply and control inflation. However, since the Dencun upgrade, the burn rate has reached its lowest point since Ethereum moved to proof-of-stake. This means that more ETH is entering circulation, which puts additional inflationary pressure on the asset.
According to EgyHash, the reduced burn rate, coupled with low network activity, has left Ethereum struggling to maintain its value. For the network to recover, a significant increase in network activity and transaction fees is necessary. However, if inflation continues to outpace demand for the asset, Ethereum’s price could remain under significant pressure, possibly even facing a 91% crash, as some analysts predict.
Outlook for Ethereum
Ethereum’s challenges are far from over. The combination of declining network activity, low transaction fees, and reduced whale participation points to a tough road ahead. For Ethereum to regain its previous growth trajectory, the network will need to see a reversal in these trends, with increased engagement, higher fees, and a healthier ecosystem for validators.
If these conditions do not improve, Ethereum may struggle to avoid further declines, and its price could continue to face downward pressure, potentially hitting levels that have not been seen since 2020. Only time will tell if Ethereum can overcome these obstacles and re-establish itself as a dominant force in the cryptocurrency space.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a "detective-like" mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
