Ethereum (ETH) has faced challenges in surpassing the crucial resistance level of $2,000 in recent months, while Bitcoin (BTC) experienced a significant gain of 11.94% after BlackRock’s ETF application. In contrast, ETH saw a modest increase of around 3.16%. Despite attempts in early July to push the price above $1,900, a failed breakout exposed ETH to further correction. The Ethereum network also witnessed a decline in activity, including reduced transaction fees and a drop in NFT collections’ prices.
However, the potential downside may be limited due to the growing demand for liquid staking derivatives (LSD), particularly Lido’s stETH. On-chain analytics firm Glassnode reported that deposits to staking contracts have consistently outweighed exchange inflows since the launch of the Shanghai upgrade. This suggests that more ETH is being moved toward staking rather than being sold on exchanges. Currently, LSD platforms, independent validators, and staking-as-a-service clients capture most of the ETH inflow.
The report indicates that the number of new holders has remained relatively unchanged year-to-date for Lido’s stETH. With only 20% of Ether’s total supply staked with validators compared to other proof-of-stake blockchains, such as Solana, Cosmos, and Avalanche, which have over 40%, there is room for growth. LSD derivatives offer a base rate of 4% with additional yields available by utilizing liquidity in DeFi applications. The report highlights Lido’s stETH as the most significant LSD derivative, and LSD token holders are shifting from providing liquidity on DEXes to chasing higher yields on lending protocols like Compound and Aave.
In terms of price analysis, ETH experienced a positive breakout from a bullish ascending channel pattern with a target of $3,000. However, the trend reversed as Bitcoin dropped to $30,000 due to expectations of a rate hike by the U.S. Federal Reserve. Technically, ETH could find support around $1,790 before attempting to break the $1,900 resistance level again, or it could continue dropping towards the long-term support level of $1,700. A breakdown below $1,700 would allow sellers to target the 200-day weekly moving average at approximately $1,575.
The ETH/BTC pair also suggests room for further downside before reaching the 200-day moving average and the long-term support level. Despite the potential for further price correction, the surge in LSD narrative with higher yields compared to DeFi provides a cushion for any future downside. This indicates that the price is likely to establish bullish support.
Note: This article does not offer investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.