Ethereum prices have lost 16% over the past week, continuing their downward trajectory, according to the latest CoinMarketCap data. With key support levels weakening, analysts are increasingly concerned that it could drop to $1,200. Network advantages in the blockchain ecosystem also face increasing threats from competitors, such as Solana and the ongoing Layer 2 solution.
Major Price Support Levels
Ethereum prices have been trapped in a bearish cycle as they didn’t break the $4,000 resistance. It has steadily declined and violated several support levels, including a significant 200-day moving average of $3,000. ETH recently found support for $2,200 and attempted to rebound, but remains vulnerable as long as it is below the 200-day moving average.
On the four-hour chart, Ethereum is in a consolidated pattern, trading at $2,764 at publication. The price is being tested at $2,229 on February 3, and is attempting to recover the price. The same chart shows the relative strength index (RSI) remains below 50%, highlighting the sustained bearish momentum. A deeper correction is expected if ETH cannot retrieve the $3,000 mark.
Ethereum’s futures market offers additional insight into the ongoing price struggle. Funding rates, a measure of sentiment among traders, have declined significantly since the latest recession.
This suggests that the futures market is no longer overheating, but also reflects the lack of strong purchasing interest required for a recovery. Without new demand in the spot market, there is a small chance of ETH rebounding. The Crypto community remains divided into ETH’s future trajectories, expressing concern that the breakdown of key support at $2,400 could drop sharply to $1,200.
Ethereum’s competitive challenges
Ethereum’s struggle is not just about price-related. JPMorgan’s latest report noted that, according to a Coindesk report, Ethereum is facing an increasing competition with alternative blockchains, particularly Solana.
Another issue that banks highlighted is that Ethereum relies on layer 2 networks. These scaling solutions help reduce congestion, but distract activity from the Ethereum mainnet. Analysts at JPMorgan warned that the shift could lead to reduced transaction fees and effective revenue, which could ultimately weaken Ethereum’s economic model.
A notable example of this trend is Uniswap’s transition to Unichain. As one of Ethereum’s biggest gas-consuming protocols, Uniswap’s movement can have a major impact on network activity and fee generation.
Despite current bearish outlook, Ethereum still has the potential to regain momentum. Key on-chain metrics suggest some positive signs, including a recent decline in net exchange flow.
However, if Ethereum cannot regain its major resistance levels and attract new demand, there could be further losses on the horizon. For now, all eyes remain at the $2,400 support level on the daily chart.
This article was written by Jared Kirui at www.financemagnates.com.