The decline in daily active Ethereum addresses comes as the price of ETH is holding steady, raising fears of a potential drop in the future.
Ethereum has seen a significant drop in its daily active address count (DAA) over the past four months, raising fears of further downside for Ether.
Price in the next few weeks.
Stagnant Ethereum Price Scares Investors
The Ether DAA number fell to 152,000 on Oct. 21, its lowest level since June, according to data provided by Santiment. In other words, the jump showed fewer unique Ethereum addresses interacting with the network.
Ethereum’s daily active address features a daily time frame. Source: Sentiment
Interestingly, the decline comes after Ether’s more than 80% correction from its November 2021 high of around $4,850. This coincidence could mean two things: Ethereum users have decided to leave the market and/or stop their interaction with the blockchain network after the market crash.
Analysts at Santiment blamed the drop on “weak hands”, sentimental traders who fall out of the market during a bearish or stagnant phase, noting:
“Disinterest [is] at an all time high as [Ethereum] prices have stalled.”
Notably, the price of ether has been trading in the $1,200-$1,400 range for over a month, accompanied by a decline in weekly trading volumes.
The disinterest among investors is also visible about Ethereum-based investment funds. These funds witnessed $3.9 million worth of outflows in the week ending Oct. 14, according to the latest CoinShares weekly report.
Capital flows in and out of crypto funds. Source: CoinShares
Additionally, these outflows reached $368.70 million YTD.
40% ETH price drop in-game
Cryptocurrency prices have fallen along with other riskier assets during 2022, reduced by global central banks’ tightening policies to curb rising inflation. However, they risk further bearishness as inflation remains elevated, prompting more rate hikes in the future.
* MAY 2023 FED FUND FUTURES COME AT 5.00% DEALER PRICE ON A ZINNER HOUSE
— Investing.com (@Investingcom) October 20, 2022
Ethereum could suffer due to macro risks related to inflation. In other words, ETH/USD could slide below its prevailing ascending trendline support, triggering a classic continuation formation called an ascending triangle, as illustrated on the chart below.
ETH/USD weekly price chart with ascending triangle breakout setup. Source: TradingView
The profit target of an ascending triangle pattern is measured after adding the maximum distance between its horizontal trendline resistance and ascending trendline support to the breakout point. As a result, ETH’s downside target is around $750, or 40% lower than current price levels.
Related: Why is the crypto market down today?
Conversely, a bounce off the lower trendline could have a rally towards the upper trendline. That is, a rise to $1,800 in October, 40% more than current prices.
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