- The price of Ether (ETH) has plummeted over 30% during Q3 of 2024, marking its worst performance in five years.
- Several macroeconomic factors, including geopolitical tensions and U.S. recession fears, have contributed to the downturn.
Ethereum is currently experiencing one of its most challenging third quarters since 2019, with Ether (ETH), its native cryptocurrency, suffering a staggering 30% drop in value during the period. The price of ETH, which remains below the $3,000 mark, reflects a combination of seasonal trends and significant macroeconomic pressures.
September has historically been a difficult month for global financial markets, including cryptocurrencies. One reason for this is the seasonal slowdown in economic activities, especially in the Northern Hemisphere, where the summer holidays often lead to reduced market activity. This year, Ether has been particularly vulnerable, with its price taking a sharp hit since early August’s “Black Monday,” a day marked by a cascade of adverse events.
A closer look at the market performance shows that Ether’s current decline outpaces previous yearly trends. For example, in 2023, ETH experienced a 13.64% drop during the same quarter, making this year’s downturn significantly more severe. In fact, the last time Ethereum faced such a sharp quarterly decline was in 2019, when its price plunged by 37.43%.
Several factors have contributed to this bearish trend. Early in August, the market was rattled by fears of a looming economic recession in the United States, compounded by the winding down of Japan’s carry trade with the yen. Meanwhile, escalating geopolitical tensions—particularly between Israel and Iran, and ongoing developments in the Russia-Ukraine war—have further intensified the market’s anxiety. These events combined to create a “perfect storm,” leading to a widespread sell-off across the cryptocurrency market, including Ethereum.
Since then, ETH has struggled to regain its footing, with its price stagnating at $2,360 as of mid-September 2024—50% below its all-time high from November 2021.
Adding to Ethereum’s woes, the highly anticipated launch of Ether-based exchange-traded funds (ETFs) in the United States failed to provide the price boost many investors had hoped for. According to data from SosoValue, these ETFs saw more outflows than inflows, accumulating net capital exits of over $590 million between late July and mid-September. This lack of investor enthusiasm has kept ETH’s price subdued.
The underperformance of Ethereum’s Layer 1 network further exacerbates the situation. Data from CryptoQuant suggests that the recent Dencun update, designed to introduce temporary data storage on Ethereum’s Layer 2 networks, has inadvertently reduced demand for ETH. With more users conducting transactions on these cheaper, faster Layer 2 solutions, the need for ETH to pay gas fees has diminished, putting additional downward pressure on the token’s price.
Data from Token Terminal shows that Layer 1 revenue has dropped a staggering 99% since March 2024, highlighting the magnitude of the slowdown.
As the quarter draws to a close, much of the market’s attention is turning to the potential actions of the U.S. Federal Reserve. A reduction in interest rates could act as a catalyst for higher-risk assets like Ether and Bitcoin, potentially drawing investors back into the market. However, if interest rates remain elevated, the appeal of safer, more stable investments such as U.S. Treasury bonds may outweigh the potential gains from cryptocurrencies, keeping ETH prices under pressure.