The past week has seen Ethereum’s native token, Ether (ETH), face an 8.2% decline in its price. Several factors have contributed to this decrease, including changes to Ethereum’s coin issuance mechanism, sales by Vitalik Buterin, and a disappointing first week for the futures-based exchange-traded fund (ETF) instrument.

In 2022, the Ethereum network underwent significant upgrades that impacted its coin issuance mechanism, resulting in a reduction in the number of new Ether tokens issued and the introduction of a burn mechanism to decrease the supply of ETH. Referred to as “ultrasound money,” this new supply schedule has seen a net decrease in the total ETH supply. However, the unpredictability of this monetary policy became evident in September 2023, when decreased network activity led to an increase in the supply of ETH, deviating from the previous trend of decreasing supply.

Data from the Ethereum analytics provider ultrasound.money reveals that the past 30 days have seen the supply of ETH increase by 30,064 ETH due to decreased activity in the burn mechanism. This increase can be attributed to high fees resulting from persistent network congestion, which layer-2 scaling solutions have only partially addressed. The reduced demand in transactions has led to an unexpected trigger for increased coin issuance.

Addressed associated with Vitalik Buterin have recently sent 3,999 ETH to exchanges, sparking speculation about the reasons behind this significant movement. The most recent transaction suggests that the ETH was likely exchanged for fiat currency. Additionally, the Ethereum Foundation has sold 1,700 ETH to cover operational expenses, grants, and incentives. While these sales align with regular requirements, they contribute to the negative sentiment surrounding Ether’s price.

A crypto wallet address linked to the FTX exploiter has moved a significant portion of the initially held 175,496 ETH to the THORChain router and converted it into the tBTC token. This move prompted THORSwap to suspend conversion transactions after consultations with advisors, legal counsel, and law enforcement. The reasons behind this on-chain activity are uncertain, with the possibility of anticipating higher returns in fiat currency terms.

Ether’s price trend against Bitcoin has been unfavorable since November 2022, underperforming Bitcoin by 25.7% in the last 11 months. This has led to the breach of the 0.06 support level for the ETH/BTC ratio. Factors contributing to this negative sentiment include lawsuits against Binance and Coinbase by the U.S. Securities and Exchange Commission in June 2023.

The launch of Ethereum futures-based Ether ETFs on the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) did not meet expectations, with less than $10 million in aggregate assets under management during the first week of trading. This has further impacted Ether’s price and contributed to the overall negative news surrounding the cryptocurrency.

Ethereum faces various challenges that have affected its price and market sentiment. The unpredictability of its monetary policy, increased coin issuance due to reduced network activity, sales by Vitalik Buterin and the Ethereum Foundation, and the underperformance against Bitcoin all contribute to the negative outlook. Additionally, the disappointing first week for the Ether ETFs adds to the bleak news surrounding Ethereum. It remains to be seen how these challenges will impact the future of Ethereum and its native token, Ether.

Analysis

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