Ethereum (ETH) experienced a significant decline of over 7% on Thursday, breaching the critical $2,500 support level. This downturn coincided with notable growth in stablecoin activity across its ecosystem, even as technical indicators suggest potential further downside toward the $2,260 region.
Surge in Stablecoin Activity Amid Market Volatility
The Ethereum ecosystem, encompassing both its Layer 1 (L1) mainnet and Layer 2 (L2) scaling solutions, has processed over $11 trillion in stablecoin transaction volume so far in 2025. This represents a substantial increase in market share, rising from 40% in 2024 to 60% this year, according to data from CEX.io.
While Solana and various L2 networks led in transaction volume earlier in January, Ethereum has demonstrated a strong recovery throughout the period. This resurgence in stablecoin activity aligns with a dramatic reduction in network transaction fees, which fell by over 92% in April to below 1 gwei. This cost reduction has made Ethereum increasingly attractive for stablecoin transfers compared to alternative blockchains.
"Its record-low fee period created the perfect environment for this growth in stablecoin activity," noted Illya Otychenko, Chief Analyst at CEX.io.
The low-fee environment proved particularly attractive to automated trading systems. May saw bot-related stablecoin activity reach unprecedented levels, with volume hitting $480 billion across 4.84 million transactions. This represented 57% of total stablecoin volume and 31% of all transactions on the network.
This recovery in Ethereum's stablecoin activity mirrored a similar rebound for its native cryptocurrency, Ether, which recorded gains exceeding 40% during May. ETH's market dominance likewise increased from 7.4% to 9.7% during this period.
Concurrently, U.S. spot Ethereum exchange-traded funds (ETFs) extended their inflow streak to 13 consecutive days, recording net inflows of $56.98 million on Wednesday.
Technical Analysis: ETH Struggles at Key Resistance Level
Ethereum's 7% decline over 24 hours triggered substantial liquidations in the derivatives market, totaling approximately $189.75 million according to Coinglass data. Long positions accounted for $174.78 million of these liquidations, while short positions represented $14.97 million.
These liquidations occurred after ETH faced rejection at the 200-day Simple Moving Average (SMA) on Wednesday. This technical indicator has served as critical resistance since ETH's significant rally between May 8-13, with price experiencing over eight separate rejections at this level.
Following this latest rejection, ETH has broken below the lower boundary of a rising wedge pattern. A sustained break below this wedge support confirms a bearish outlook, potentially pushing prices toward the $2,260 to $2,110 range, where the 50-day SMA may provide dynamic support.
For a bullish reversal scenario, ETH must reclaim the wedge pattern's support and establish a sustained move above both the 200-day SMA and the crucial $2,750 to $2,850 resistance zone. Such a breakthrough could initiate an upward trend toward testing the $3,250 level. Historically, Ethereum has launched substantial rallies after decisively breaking above its 200-day SMA.
Technical indicators currently favor bearish momentum, with the Stochastic Oscillator sitting in oversold territory and the Moving Average Convergence Divergence (MACD) histogram bars remaining below neutral levels.
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Frequently Asked Questions
What caused Ethereum's recent price decline?
Ethereum dropped over 7% primarily due to technical factors, including rejection at the 200-day moving average and a breakdown from a rising wedge pattern. This triggered significant long position liquidations in the derivatives market, exacerbating the downward movement.
How does stablecoin activity affect Ethereum's price?
High stablecoin transaction volume typically indicates robust network usage and can create demand for ETH to pay transaction fees. The recent $11 trillion in stablecoin volume demonstrates substantial ecosystem activity, though this doesn't always directly correlate with short-term price movements.
What are the key support levels for Ethereum?
Immediate support appears around $2,260, with stronger support near $2,110 where the 50-day moving average may provide dynamic buying interest. These levels could serve as potential accumulation zones if the current downward trend continues.
Could Ethereum ETFs reverse the current trend?
While Ethereum ETFs have recorded consistent inflows, their impact may be more structural than immediate. Institutional adoption through ETFs typically develops over longer timeframes rather than providing immediate price support during technical breakdowns.
What does the rising wedge pattern breakdown indicate?
The breakdown from the rising wedge pattern typically suggests a reversal of the prior upward trend. The measured move target based on this pattern projects toward the $2,260-$2,110 range, though market conditions can alter these technical projections.
How important is the 200-day moving average for Ethereum?
The 200-day moving average represents a critical psychological and technical level for institutional traders. Repeated rejections at this level indicate strong resistance, while a future breakthrough could signal renewed bullish momentum.