Ethereum’s Struggle to Reach $5,000: Key Factors Holding Back the Rally

Ethereum, the second-largest cryptocurrency by market cap, has long been expected to breach the $5,000 psychological barrier. However, despite the recent launch of spot ETFs that propelled Bitcoin to new heights, Ethereum’s price has struggled to maintain a sustained upward trajectory. Let’s examine the primary factors preventing Ethereum from achieving its much-anticipated “God candle” moment.

Lackluster Interest in Spot Ethereum ETFs

Unlike Bitcoin, spot Ethereum ETFs have failed to generate significant investor enthusiasm since their July 23rd debut. Consequently, Ethereum’s price has been on a downward trend, falling 23% before stabilizing above the $2,200 mark.

Recent data shows that spot ETH ETFs recorded a modest inflow of just $3.06 million, consistent with the low inflows observed throughout the week. Eric Balchunas, a senior ETF analyst at Bloomberg, highlighted the difficulty in marketing Ethereum to traditional investors, noting the lack of a simple, compelling narrative like Bitcoin’s “digital gold” proposition.

PlusToken’s Ethereum Liquidation Sparks Market Concerns

The PlusToken scheme, a major cryptocurrency Ponzi operation that ran in China from 2018 to 2019, resulted in the seizure of approximately 830,000 ETH by authorities. While most of the confiscated Bitcoin has been sold off, the Ethereum holdings remained untouched until recently.

OTC Research reports that the Chinese government has begun liquidating the remaining 542,000 ETH, valued at roughly $1.3 billion. In the past 24 hours, 15,700 ETH was moved to an unknown address, while 7,000 ETH was transferred to an exchange, fueling speculation about potential selling pressure.

These large-scale transactions could significantly delay Ethereum’s rally to $5,000.

Ethereum Issuance Rate Hits Two-Year High

According to data from SatoshClub, Ethereum’s issuance rate reached 0.74% in September, its highest level in two years. This increased supply suggests that the network is experiencing higher inflation rates than in recent months.

The deflationary mechanism Ethereum implemented through fee-burning has been notably impacted by the growing adoption of Layer-2 (L2) solutions following the Decun upgrade. L2 networks like Arbitrum and Optimism offer reduced transaction fees, drawing activity away from Ethereum’s mainnet and resulting in decreased burning activity.

With more ETH being issued and the deflationary mechanism underperforming, the increasing supply is likely to exert downward pressure on the coin’s price.

Analyst Predicts Short-Term Pullback Before Potential Rally

A recent chart analysis by crypto trader Inmortal suggests that Ethereum’s price could experience a further 13% correction, potentially reaching the multi-month support level of $2,104. However, the analyst also notes the possibility of a false breakdown at this support, which could lead to a significant bullish reversal.

If buyers can maintain momentum at the $2,104 support level, a major rally could ensue, potentially pushing Ethereum’s price to $4,200. Conversely, failure to hold above $2,000 could trigger a more severe correction.

As Ethereum navigates these challenging market conditions, investors and enthusiasts alike will be closely watching for signs of a breakthrough that could finally propel the asset towards the elusive $5,000 milestone.