Ethereum (ETH) price pinned below $2.2K — Here’s why

Ether (ETH) price surged 14.2% after rebounding from the $2,000 support level on March 4 but has struggled to sustain levels $2,200. Notably, ETH has underperformed the broader cryptocurrency market by 11% over the past two weeks, reflecting investor uncertainty. To regain bullish momentum, key obstacles must be addressed.

While it is difficult to pinpoint the exact reasons behind traders reducing ETH exposure, several factors likely contributed to weaker sentiment. These include declining onchain activity, a lower total value locked (TVL), a net positive ETH issuance rate, and speculation surrounding a potential US strategic digital asset reserve. Overall, demand for ETH as Ethereum’s native token appears weaker.

Weak onchain activity, spot ETF outflows and ETH supply increase boost concerns

Ether investors may be concerned about the growing likelihood of Solana (SOL) securing approval for spot exchange-traded funds (ETFs) in the US, which could increase competition for institutional capital. Currently, only Bitcoin (BTC) and ETH hold this status, yet Ether ETFs saw $336 million in net outflows between Feb. 19 and March 4. While this highlights weak ETH performance, it appears more as a symptom than a primary cause.

To understand the key drivers behind Ether’s underperformance, it is essential to analyze Ethereum’s onchain metrics.

The Ethereum network maintained its leadership in 7-day decentralized exchange (DEX) volume, reaching $22.45 billion. However, the gap with competitors narrowed, particularly as Solana saw a 4% gain over the same period. Key weaknesses for Ethereum included a 49% drop in activity on Curve Finance and a 16% decline in Pendle volumes, according to DefiLlama data.

Similarly, Ethereum’s total value locked (TVL) fell 13% over two weeks to $50.8 billion, raising concerns about whether ETH can outperform the broader cryptocurrency market in the near term. In comparison, BNB Chain’s TVL declined by 8% in the same period, though it remains significantly smaller at $5.1 billion.

Uniswap was among the weakest performers in Ethereum deposits, with total value locked (TVL) dropping 22.5% over 30 days. Other notable declines included Ether.fi (-18.8%), Lido (-17.3%), and Morpho (-17%).

The slowdown in Ethereum’s onchain activity has created an unusual scenario where average transaction fees fell below $1 for the first time since July 2020. However, demand for blockchain processing remains weak, leading to an increase in ETH supply. The burn mechanism introduced by EIP-1559 has been largely offset by the expansion of blob space for layer-2 scalability solutions.

Related: Bitcoin will ‘likely continue to consolidate’ in this pullback phase — Analyst

Whether the upcoming ‘Pectra’ network upgrade can balance fee distribution across the Ethereum ecosystem is still unclear. However, it’s likely that more adjustments will be needed later. Additionally, US Commerce Secretary Howard Lutnick has reportedly confirmed that Bitcoin would receive a “unique status” under Donald Trump’s plans.

On March 7, the first White House crypto summit will bring together top industry executives, founders, and investors with representatives from the president’s working group on digital assets. They will discuss regulatory plans and Trump’s proposed crypto strategic reserves. Traders now worry that Ether has a low chance of being included as a leading asset, which could limit ETH’s upside potential.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.