Matrixport: Ethereum may rebound due to low RSI and upgrade plan

Ethereum will be great again

Citibank's latest report pointed out that the price of Ethereum (ETH) has fallen by more than 20% this year, but its fundamentals are improving. The total value locked (TVL) on the Ethereum network has risen sharply, while the Ethereum ETF continues to attract capital inflows, with a cumulative inflow of US$3.2 billion since its launch in July. In addition, related search popularity is also rising.

Despite the recent volatility in user activity, Citi analysts said that Ethereum's fundamentals are not entirely pessimistic. The report also mentioned that former US President Trump's World Liberty Financial holds more than $200 million in Ethereum, which may be seen as an additional impetus for the United States to strengthen its support for the encryption industry. At the same time, Ethereum's weak performance coincides with the rise in Bitcoin's dominance rate, which has now risen to a multi-year high of more than 60%.

The Matrixport report pointed out that Ethereum's relative strength index (RSI) has fallen to a historical low, close to the extreme oversold range, which may provide conditions for ETH prices to rebound. In addition, Ethereum's highly anticipated Pectra upgrade is scheduled to be launched in March 2025. This upgrade integrates the original Prague and Electra versions and is expected to significantly improve the network's scalability, efficiency and user experience.

The report also mentioned that the market may release multiple testnet announcements before the upgrade is officially launched in March, which may further boost market sentiment. Although Ethereum's upgrade events in history are often accompanied by "sell news" market conditions, the current oversold market background may create opportunities for ETH prices to rebound.

Paradigm is also optimistic and believes that Ethereum has always been a pioneering force in the crypto space. Ethereum has paved the way for smart contracts, decentralized autonomous organizations (DAOs), and decentralized finance (DeFi), and has continued to innovate on cutting-edge challenges such as zero-knowledge proofs (ZK) and maximum extractable value (MEV). Ethereum's community of researchers and engineers has established a solid foundation for the next generation of decentralized applications.

HashKey Jeffrey believes that Ethereum was once the core driver of the DeFi and NFT wave. However, its dominance has been challenged in recent years as the market focus has shifted to AI, RWA (real world assets) and Memecoin. For example, many AI projects and Solana's Memecoin have not chosen Ethereum as their main platform, causing it to be gradually marginalized in the emerging narrative.

In addition, unlike the influx of funds when the Bitcoin ETF was launched, the ETH ETF saw capital outflows after its listing, partly due to the selling pressure of Grayscale's old products.

However, paradoxically, institutions' long-term interest in ETH is still heating up. Bernstein analysts predict that ETH may become the "institutional darling" in 2025 due to mechanisms such as staking income (28% of ETH is staked), smart contract lock-in (7.5%) and ETF absorption (3%). This misalignment of short-term and long-term expectations highlights the market's confusion about ETH's ability to capture value.

Different views

Imran Khan and Qiao Wang, co-founders of Web3 accelerator and founder community Alliance DAO, shared their views in a podcast titled “On Consumer Crypto”:

Imran believes that "Base supporters in the current market have turned to Solana." Qiao responded to this view: "Solana is easier to attract users. For developers familiar with EVM, it is not easy to switch to Solana. They need to learn a whole new set of tools, but even so, they still think it is worth it because Solana provides a better user base and ecological support."

Qiao also said: "I actually held Ethereum since the genesis block. But I sold it last year. I held it for a full 10 years. You can imagine holding an asset for 10 years and then suddenly feeling that its growth potential is almost over."

JPMorgan pointed out in its latest report that Ethereum (ETH) has performed worse than Bitcoin (BTC) and other competing chains recently, mainly because it lacks the market appeal of Bitcoin's "digital gold" narrative and faces fierce competition from blockchains such as Solana.

In addition, according to monitoring by The Kobeissi Letter, Ethereum (ETH) short positions have surged 500% since November 2024 and increased 40% in the past week, reaching a record high, showing the extreme bearish sentiment of Wall Street institutions on ETH. Despite Bitcoin's repeated record highs, ETH is still about 45% lower than its historical high in 2021, forming a huge gap. After the Trump administration came to power, the SEC's regulatory risk on ETH's securities attributes decreased, and even Eric Trump publicly called for ETH, but market sentiment remained sluggish.

The current market discussion on the reasons why ETH is being shorted on a large scale by institutions may involve market manipulation, institutional hedging strategies, or bearish expectations on ETH's development prospects. With the extreme accumulation of short positions, the market has begun to pay attention to whether ETH may experience a short squeeze, triggering a strong rebound.

Final Thoughts

Although the price of Ether (ETH) has fallen recently, the fundamentals of Ethereum are improving. The total value locked (TVL) has increased, and the Ethereum ETF has attracted a large amount of capital inflow. Despite the fluctuations in user activity and market competition, Ethereum remains a pioneering force in smart contracts, decentralized finance (DeFi) and other fields.

In the future, Ethereum will significantly improve the scalability, efficiency and user experience of the network in the Pectra upgrade to be launched in March 2025. Institutional long-term interest in ETH is also heating up, and its staking income, smart contract lock-in and ETF absorption mechanism are expected to make it an "institutional darling". Through continuous innovation and ecosystem optimization, Ethereum is expected to usher in a glorious moment again!