While Bitcoin has almost managed to break through the $100,000 resistance, Ethereum, the second biggest cryptocurrency in terms of market capitalization, which is always the first to benefit from BTC growth, this time lags way behind. One may even say that ETH risks not only missing the much-awaited altcoin season that is coming but also it is facing high odds of rolling down below the $3,000 level for a number of reasons we will look at in this review.
Ethereum May Fail to Catch Up with the Altcoin Reason
Currently, Ethereum faces an important turning point since many analysts are concerned that ETH could fall back during the approaching altcoin season and go way down rather than grow. Analyst are naming several important factors which are contributing to ETH price reverse. Those include Ethereum’s long-standing scalability issues, high competition from other blockchain platforms, etc.
Since these risks are getting combined with the rapidly increasing lack of new growth narrative, Ethereum is likely to see its dominance in the crypto market dented severely. Below, the aforesaid issues that Ethereum is facing are discussed in detail.
Drivers that may hold Ethereum back
The scalability issue remains a critical issue for Ethereum. Even though, it has recently transitioned to the proof-of-stake consensus algorithm via a series of recent updates, which included Merge, from the previous proof-of-work one still used by Bitcoin and a bunch of other cryptos, PoW does not directly deal with the immensely high transaction fees and congestion that dominates the network. This issue becomes particularly concerning during an altcoin season when trading volumes intensify on crypto exchanges. The days when Ethereum had no rivals are long gone with such blockchains as Arbitrum, Optimism Layer-2 solutions running now. All of them and many others aim to avoid congestion faced by Ethereum and its high gas fees, which become even higher during the times of its heavy usage.
And this is where we come to the next big issue – an intense and rising competition from alternative blockchain platforms. Many new platforms have emerged over the past several years, including Solana, Avalanche, and BNB Chain. They have gained reputations as faster, low-cost platforms, and much more efficient compared to Ethereum. Solana offers high transaction throughput and cheap gas fees, attracting a lot of new developers and users that seek cost-effective blockchain solutions.
Should these platforms keep growing in popularity, Ethereum faces losing a large share of its market to these rivals, in particular in the DeFi and NFT sectors, which have historically helped it to expand and gain new users.
Another significant hindrance to Ethereum’s performance is regulatory uncertainty. After the US Security and Exchange Commission (SEC) began scrutinizing the cryptocurrency market under the current chairman Gary Gensler, Ethereum’s staking feature post-Merge has garnered a lot of attention from the regulator. Critics assume that Ethereum’s staking model could be classified as a security by the SEC. Should this happen, it will be heavily scrutinized by the regulator. This potential development could push away institutional investors from ETH and slow down the ecosystem’s growth, especially if exchanges and DeFi apps become driven to delist ETH or reduce their offers of Ethereum-related services.
Macroeconomic factors challenging Ethereum’s performance
Aside from those challenges specific to the blockchain sphere in particular, there are macroeconomic factors that have a substantial impact on Ethereum’s price trajectory. Now, that Bitcoin, which Ethereum price usually follows, has been exploding in price thanks to the elections recently won by the pro-crypto candidate Donald Trump and the Fed Reserve pivoting from a hawkish stance to a doveish one with its interest rate cuts, ETH has failed to pick up price speed so far.
Another strong head-wind for Ethereum now is the lack of a strong bullish narrative and it may prevent ETH from showing up a bullish performance. While in 2020-2021, Ethereum’s boost was down to largely the explosion of the DeFi and NFT spheres, now the interest two these two has somewhat waned and ETH is struggling to establish a new powerful growth driver. Lack of this factor may leave Ethereum in the shadow of other new projects with innovative narratives in the cryptocurrency space. Summing up high chance of all these negative factors potentially coming together and hitting Ethereum, the likelihood of it losing the $3,000 price mark becomes highly possible.
Still, despite these obstacles and growing challenges, Ethereum remains a foundational asset in the crypto space with a robust community of developers and users, with its extensive ecosystem of dApps and institutional interest to ETH thanks to the spot ETFs launched in May this year.
