Ethereum’s native cryptocurrency, Ether (ETH), has been in a downtrend for nearly six weeks, struggling to break past the crucial $3,400 resistance level. Analysts suggest that stronger blockchain activity, increased adoption, and collaboration with both public and private entities could help Ethereum regain investor confidence and reclaim its all-time high.
At the time of writing, ETH is trading at around $3,260, having fallen more than 20% since slipping below the psychological $4,000 mark on 16 December 2024, according to Markets Pro data.
Competition From Other Layer-1s
Aurelie Barthere, principal research analyst at Nansen, believes Ethereum must boost fundamental blockchain activity to reverse its decline. She highlights growing competition from other layer-1 blockchains, which are catching up in terms of applications, use cases, fees, and staking activity.
ETH/USD, 1-day chart. Source: TradingView
Ethereum’s potential for wider adoption could be bolstered through strategic partnerships, particularly in the US, where regulatory developments have recently been more favourable towards blockchain and cryptocurrency, Barthere told.
Musk’s DOGE and Trump’s Crypto Ventures
One key factor that could aid Ethereum’s resurgence is its possible involvement with the Elon Musk-led Department of Government Efficiency (DOGE). While not a governmental agency, DOGE has reportedly explored blockchain-based solutions for expense tracking and financial management. Barthere noted that public blockchain representatives have allegedly engaged with DOGE, sparking speculation about potential Ethereum-based implementations.
In addition, Ethereum could play a role in upcoming ventures linked to former US President Donald Trump. Joseph Lubin, co-founder of Ethereum and founder of Consensys, suggested that the Trump family may be considering an Ethereum-based cryptocurrency business. Increased institutional interest through Trump’s World Liberty Financial protocol could further boost ETH adoption and demand in the coming months.
Ether Options Show Bullish Momentum
Despite the recent price struggles, Ether options trading has surged, signalling renewed optimism in the market. A research report from Bybit and Block Scholes on 31 January highlighted that trading volumes for Ether options have reached their highest levels in over a month, indicating a recovery from the recent sell-off.
However, a Block Scholes analyst cautioned that while increased trading activity in options markets reflects a bullish sentiment, it will not directly influence ETH’s price. Analysts have observed a notable rise in bullish Ether options contracts, with traders betting on a price rebound.
ETH options skew. Source: Block Scholes
“The larger notional value of call option open interest that we have seen throughout January is now once again backed by a bullish skew towards Out of the Money [OTM] calls at volatility smiles across expirations,” the report noted.
Key Resistance at $3,400
Crypto trader Cas Abbé believes Ethereum must close above $3,400 on the daily timeframe to confirm a bullish breakout. Writing in a 1 February post on X (formerly Twitter), Abbé stated:
“ETH is forming a bullish divergence on the daily timeframe. […] To continue the uptrend, ETH needs a 1D close above $3,400, and the rally towards $4,000 will happen very soon.”
However, ETH faces strong resistance at this level. A breakout above $3,400 would trigger over $1.09 billion worth of cumulative leveraged short liquidations, according to data from CoinGlass.
With growing institutional interest, potential adoption by Musk’s DOGE initiative, and speculation around Trump-linked financial ventures, Ethereum’s prospects for a recovery remain promising. However, reclaiming the $4,000 mark will require increased blockchain activity, strategic collaborations, and overcoming the immediate resistance at $3,400.
