Ether ( ETH ) price dropped 12% between Oct. 1 and Oct. 3 after failing to surpass the $2,650 resistance level. This bearish momentum wiped out all gains from the previous two weeks, extinguishing the optimism that had emerged following the breach of the $3,000 support level two months earlier.

Traders are now questioning whether Ether can recover to $2,800 and what conditions are necessary for ETH to reverse its current trend and outperform the broader cryptocurrency market. 

Although Ether's price has fallen 5% since Sept. 1, the total cryptocurrency market capitalization has grown by 1.4%.

Ethereum price falls 12% in 2 days — Are investors running out of reasons to hold ETH? image 0

ETH/USD (green) vs. Total crypto cap (blue). Source: TradingView

Notably, the highly anticipated Ether exchange-traded fund (ETF) launched in the United States in July disappointed investors, experiencing aggregate net outflows of $552 million since inception, according to Farside Investors data. However, this is not the sole cause of Ether’s decline but rather a consequence of diminished investor appetite.

Some attribute the Ether price weakness to persistent sell pressure from Vitalik Buterin and the Ethereum Foundation, while others cite reduced demand for decentralized applications and cryptocurrencies overall. Regardless of the specific cause, multiple factors have been keeping Ether’s price below $2,800.

Many Ethereum enthusiasts had high expectations based on the “ultrasound money” theory, anticipating Ether to become deflationary. However, this has not materialized over the past five months, as the coin issuance rate has turned positive, primarily due to changes aimed at reducing layer-2 rollup costs. Essentially, Ethereum’s strategic adjustments have negatively impacted Ether's price.

Ethereum co-founder and mastermind Vitalik Buterin believes that the space allocated for specialized data storage areas (blob space) requires optimization. In a blog post dated Sept. 28, he proposed reducing the maximum block size from the current 2.7 megabytes to 1 megabyte. This modification is intended to facilitate a more balanced utilization by layer-2 networks.

In addition to Ethereum's increasingly complex roadmap, traders have observed an Ethereum ICO participant offloading approximately 31,000 ETH over the past month after holding since the mid-2014 launch. According to onchain analytics platform Lookonchain, this entity acquired 150,000 ETH during Ether’s initial offering. 

Similarly, Vitalik Buterin transferred approximately $10 million worth of Ether to wallets linked to cryptocurrency exchanges in August, purportedly to support various projects within the Ethereum ecosystem. At the same time, the Ethereum Foundation transferred over $207 million to crypto exchanges, reportedly aimed at supporting and expanding the Ethereum ecosystem.

Ethereum network activity does not point to more ETH price downside

However, based on Ethereum network data, investors have no reason to believe that Ether’s price will underperform relative to broader market trends. Ether’s primary function derives from its decentralized processing capabilities, as evidenced by robust metrics such as the total value deposited in the network’s smart contracts and the overall volume of decentralized applications (DApps). 

Ethereum price falls 12% in 2 days — Are investors running out of reasons to hold ETH? image 1

Top blockchains ranked by 7-day volumes, USD. Source: DappRadar

Notably, Ethereum remains the market leader with $26.2 billion in trading volumes. More importantly, it has achieved a 27% increase in the number of active addresses and a 41% rise in trading volume over the past seven days. In comparison, BNB Chain ( BNB ) experienced a 15% decline in users compared to the previous week, while the TON network saw a 35% decrease in active addresses.

Related: Ethereum traders pricing in ‘more extreme movements’ ahead of US election

Highlights on the Ethereum network include a 33% increase in trading volume for Uniswap and a 122% surge in Balancer volumes, reaching $5.4 billion over seven days. Additionally, Curve processed 143% higher volumes, showcasing significant growth in user engagement and transaction activity. In terms of active addresses, EigenLayer stood out with a 114% growth in one week, while Etherfi's numbers nearly quadrupled.

Ultimately, Ether’s path to reclaiming $2,800 appears to be less dependent on decentralized application activity, which has been solid, and more reliant on balancing scalability with incentives for ETH investors to hold. This involves anticipating returns from staking or increased demand for layer-2 processing fees.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.