Ethereum, the second-largest cryptocurrency in the world, with the biggest market cap in the world aside from that of Bitcoin, has been going through a rough patch in the second and third quarters of 2024, in spite of the predictions and hopes investors had for continuous growth and development. The ETH price is settled at around $3,330 as of December 23rd, showing positive performance and continuous consolidation.
MORE NEWS: The Top 100 Lawyers in Arizona for 2025
When there’s little movement, it is much more difficult to determine whether you should be prepared for growth or losses, and designing a strategy that is flexible enough to leave room for both is not easy. Add to that the fact that the blockchain and marketplace don’t seem to be at their best, and you get a very clear picture of the troubles the market is going through at the moment.
Layer-1
The layer-1 is Ethereum’s main network, the blockchain’s base layer and the place where all transactions take place and are settled. It is a highly secure platform that operates in a decentralized fashion and is equipped with numerous safety measures that can ensure investors have a positive experience while trading. After all, given the blockchain’s decentralized nature, the money that is lost on the platform can never be recovered, so it’s important to guarantee protection against hackers and scammers. But the latest news concerning this blockchain area can seem rather worrying.
Ethereum’s layer-1 network revenue has dropped by a massive 99% since March 2024, despite the steep increase in monthly users, the number of daily transactions, and their associated costs on layer 2. According to a recent study, network fees hit their highest levels of the year on March 5th, when they reached $35.5 million. The Dencun upgrade went live a little over a week later, on March 13th, and brought a significant reduction in the amount of fees that needed to be paid in order to perform layer-2 transactions.
Scaling
The reduction in L2 fees acted as a catalyst that led to the evolution and deployment of several scaling solutions. Some analytical and research websites have put forth well over seventy different scaling solutions. Layer-3 is also becoming more visible, with these platforms creating space for decentralized apps that require enhanced efficiency and scalability to function properly. Ideally, they will be able to avoid common issues such as bottlenecks and network congestion events.
Some market analysts are more skeptical about these developments, believing that the sheer amount of L2 solutions that have been built on top of the Ethereum network far exceed market demands. Estimates say that their total number is about ten times the amount that the industry needs. The competitive environment encourages a race, as rivals are vying for the lowest transaction fees that they can offer their customers. This means that many users have moved away from the Ethereum base layer.
Supply
As a cryptocurrency, Ethereum is entirely decentralized, and that means its price is the result of several factors. Investor interest and engagement rates are two of them, but the supply must also be taken into consideration. The lower fees are also beginning to affect the supply pressure by creating inflation. These changes were introduced by the Dencun upgrade and have the potential to offset the deflationary pressure that arrived with EIP-1559. This was an Ethereum Improvement Proposal which integrated a mechanism that burns a portion of the fees directly on the network.
When there’s a swift and dramatic reduction in fees, there is also much lower demand for Ethereum, with the cryptocurrency forced to pay for the transaction fees taking place on the network. This means that the total supply of Ether coins has been steadily growing since the upgrade was launched. In the past, anytime there were low transaction costs on the Ethereum blockchain and there was also a lack of demand going along, the price was pushed below $3,000. Since this is the same market movement investors are noticing now, it’s not too much to say that history repeats itself in this regard.
$3.5K
Although the price has yet to breach the $2,700 level, some investors believe that a move to $3,000 or even above that, all the way to $3.5K, is possible. However, in order to have this become a reality, the value must hold a $2,800 weekly close. Futures traders are also staunch believers in an upward move. More reluctant investors believe that while a rally is definitely in the works, its effects won’t become apparent until the first quarter of 2025. One of the reasons for this surge in optimism is that the price charts are recording levels not seen since the launch of exchange-traded funds on the Ethereum blockchain back in July.
If Ethereum consolidates its levels and manages to reach even further, other altcoins could follow suit as well, since Ethereum is noteworthy for the market as a whole. Others are in high spirits about the price’s potential for growth and development, while also believing that the network activity has to pick up speed in order to create significant, long-lasting movements. The conditions for a rally are forming, but it isn’t realistic to expect considerable changes in the very near future. A resurgence in activity can lead to a steady rally starting from October, a month traditionally associated with growth in the crypto environment, unlike its predecessor.
Fees are at 4-year lows, layer 2 is solid and global liquidity is getting higher, characteristics that should definitely help prices evolve.
It’s essential to avoid the fear of missing out while operating in the cryptocurrency space. Since fluctuations are so common and things change so often, it’s easy to become blindsided and make some serious mistakes that will make you lose a lot of money. A sound strategy is your biggest ally when you’re looking to increase profitability.
