These three factors are helping to ease the pressure on Ethereum, ETH is below $3,000

• Ethereum ETFs have seen eight consecutive days of outflows, signaling a decline in institutional demand.
• Tier 2 chains that expand the Ethereum network have negatively impacted the revenue collected by Ether.
• The supply of Ether has become inflationary, meaning that the circulating supply is increasing, likely negatively impacting the price.
• ETH is struggling below the $3,000 resistance level, trading at $2,648 at the time of writing.

Ethereum (ETH) is trading at $2,648 early Tuesday. The second largest cryptocurrency struggled to clear key resistance at $3,000 as institutional capital exits Spot Ethereum ETFs.

The approval of the Ether ETF failed to catalyze gains in the underlying asset unlike Bitcoin, raising concerns among Ether holders.

Three factors influencing Ethereum price

The price of Ethereum fell below the key resistance at $3,000 on August 3, since then the altcoin has failed to recover above this level. Ether is trading 13% below the $3,000 level at $2,648 on Tuesday.

Three factors influencing the drop in Ether price are:

• Ethereum Spot ETF Outputs
• Tier 2 chains and their effect on tax revenue
• Ether supply increase

Spot Ethereum ETFs have seen consistent outflows over the past eight days. Data compiled by Bloomberg shows that Spot Ether ETFs launched in July lost $112 million in institutional capital.

Initial enthusiasm for Ethereum’s deflationary potential has likely died down, according to Kraken OTC Director Muneeb Khan. Ether ETF spot exits continue to reduce demand for Ether and negatively impact prices.

Ether ETF exits

The last key update to the Ethereum network was EIP-4844, also known as proto-danksharding. This reduced transaction fees for Level 2 chains and increased their utility among users. Tier 2 chains took a relatively large fraction of the transaction fees, reducing the network’s revenue.

This also affected the supply of Ether. Since EIP-4844, Ether has become inflationary again. With lower transaction costs, a relatively low volume of ETH is collected as fees and burned, resulting in a relatively higher circulating supply of the asset than otherwise.

A higher supply in circulation usually increases the volume of the asset available in exchanges and users’ wallets, which leads to more selling pressure and prevents prices from rising.

Ethereum supply

Ethereum could drop to $2,500 before recovery

Ethereum has been in a downtrend, with the altcoin falling below the crucial $3,000 level on August 3 and struggling to recover. The altcoin could extend losses by another 3% and collect liquidity at the key support of $2,536, a level that has strengthened price action throughout this month.

Once Ethereum sweeps liquidity to this level, a recovery is likely. The Relative Strength Index (RSI) reads 42.05, which is below neutral. On the other hand, the MACD (Moving Average Convergence Divergence) indicator shows green histogram bars above the neutral line, so there is underlying positive momentum in Ether.

It is crucial for Ether to support above $2,500, another key support this month. A daily candlestick close below this support level could signal a further correction in the altcoin. $2,500 coincides with the August 12 low for Ether.

ETH/USDT Daily Chart

If Ethereum breaks the key resistance at $2,820, the August 24 peak for Ether, it could rise towards the $3,000 level and extend gains to $3,102. This marks the 50% Fibonacci retracement of Ethereum’s decline from the March 12 high of $4,093 to the August 5 low of $2,111.