The Ethereum price has been going through a rollercoaster of market movements over the past few months, but that doesn’t mean that investors have no reason to remain optimistic. Most predictions indicate that the coin will be on an ascending path this year and that growth is set to continue in 2025 as well. This won’t come as a surprise for most investors and market analysts who know that this is the natural progression of the market and that after a slump, crypto prices inevitably spring back into action once more.
Inflation
May 2024 marks the first time Ethereum became inflationary since the Merge upgrade, which occurred in mid-September 2022. Back then, the marketplace was navigating one of the lowest points in its history, and the influence of the bear market was very strong. Since then, the supply has turned away from its deflationary path, partially due to the influence of the Dencun upgrade. The total supply jumped to 120.1 million on May 7th, a slight but noteworthy increase compared to the 120 million on March 12th.
Ether’s supply became inflationary once again, the first time this has occurred since the switch to the proof-of-stake consensus model. However, many analysts believe that this will ultimately only have a minor effect on the marketplace because Ethereum’s strength lies in decentralized applications. The reason for the deflationary strategy was the introduction of a mechanism that burned transaction fees permanently. This naturally resulted in a lower supply overall, since well over 400,000 coins were removed from circulation for good.
Ultrasound money
The concept of ultrasound money lies in a meme that the Ethereum community came up with to describe the deflationary tokenomics of ETH. A vital part of any such model is that it follows the standard inflationary and deflationary principles so that when the inflationary supply increases, the price goes downward, and the deflationary supply becomes sparser due to token burning. The idea behind the ultrasound money is that the burn rate exceeds the emission rate, a model that could potentially boost Ethereum’s scarcity in the long run and lead to considerable value appreciation.
In the aftermath of the Dencun upgrade, the median transaction fees became as much as four times cheaper than during previous times of similar network activity rates. However, while this is a positive change for both the network and the user community, it could also be the end of Ethereum’s ultra-sound money. The narrative might not be able to survive alongside inflationary pressures, with the main reason being that a structurally decreased amount of transaction fees being burned won’t decrease the total Ethereum supply.
Cyber attacks
Although cryptocurrencies are now far more commonplace among investors from all over the world, and even many of those who have never been involved in trading might have a rough idea of what digital currencies are, cyberattacks on blockchain platforms, unfortunately, remain commonplace. Recently, a user became the target of an address-poisoning scam. This is a deception trick in which scammers send digital assets to a wallet that resembles the victim’s address, thereby making it part of the transaction history embedded in the wallet. The idea is for the victim to make a mistake and accidentally send funds to their addresses. The scope of the attacker’s scam has been quite extensive, with the equivalent of roughly $68 million extracted from a single victim.
Now, the attacked, who mostly received Wrapped Bitcoin, sent back about $153,000 worth of Ether in what appears to be a show of good faith. They have also declared that they are open to negotiations, asking the victim to provide a messaging service account from where they can be contacted. The victim was willing to part with 10% of the funds if the rest was returned, claiming that there would be no legal prosecution if these terms were met.
$3K
The price of Ethereum is predicted to continue growing throughout the rest of 2024, but there are still obstacles the ecosystem must overcome until that point. At the moment, the rise of speculatory divergence means that ETH has been clinging to the $3,000 support level. This trend refers to the performance gap that has formed between Bitcoin and Ethereum over the past year, which consisted of poorer performance rates overall for Ethereum. During the latest cycle, Ether found itself on the losing side once more, and holders risk encountering further and more serious losses.
While Bitcoin hasn’t been at its strongest either ever since the halving, Ethereum’s downswings have been far more potent and with effects that reach much further. Ethereum had to put up with a drawdown structure that nonetheless sees much shallower corrections. This is something that shows the environment is becoming more resilient during pullbacks, a sign that market maturity and consolidation could be underway. It would also mean that net volatility will see a sharp reduction across the entire digital asset landscape.
The most severe Ethereum drawdown has been at -21%, significantly higher than Ethereum, which plunged to -44%. Unfortunately, this is nothing new, but rather part of an ongoing trend that has been going on for about two years. While there have been gains as well, the overarching trend is overwhelmingly pointing toward a slowdown. This means that the ETH/BTC ratio is similarly much weaker. And while it has shown signs of decline recently, there are many investors who remain concerned about the possibility of further losses.
Regulators
The issue of regulators in the crypto space has remained consistently relevant as legislators attempt to find the best recipe for the digital asset landscape. The fact that the coins, tokens, and the systems that power them are fundamentally decentralized is not doing the market any favors when it comes to the implementation of regulations. Right now, most investors are still waiting for information that could provide further insights into the case of the Ethereum-based exchange-traded funds. The approval of this asset class would give prices an instant boost and help the coin reach new heights.
At the same time, long- term holders appear unwilling to start selling anytime soon, even though healthy profit margins have been reached, showing once again that many are not convinced about the market’s general stability.
If you’re an investor, remember to be cautious during this time of heightened volatility to ensure that your funds and capital remain safe and sound.
