Ethereum's Six-Week Slump: Can Collaboration and Adoption Boost ETH's Price?

Ethereum, the world's second-largest cryptocurrency, has been in a downward trend for nearly six weeks, falling below the $4,000 psychological mark on Dec. 16, 2024. The decline has been significant, with Ether (ETH) losing more than 20% of its value since then, trading at $3,260 at the time of writing.

To reverse this decline and move towards its previous highs, Ethereum needs more fundamental blockchain activity, according to Aurelie Barthere, principal research analyst at Nansen. Barthere believes that other layer-1s are catching up with Ethereum in terms of apps, use cases, fees, and amount staked. To stay competitive, Ethereum could benefit from increased collaboration with private and public sector entities, particularly in the US, given the recent regulatory momentum in favor of blockchain and crypto.

Additionally, the Elon Musk-led Department of Government Efficiency (DOGE) could boost Ethereum's adoption. The non-governmental agency has reportedly explored blockchain-based expense tracking and financial management solutions, which could involve Ethereum. Furthermore, the Trump family's potential involvement in Ethereum-based cryptocurrency businesses could also generate further adoption, according to Joseph Lubin, co-founder of Ethereum and founder of ConsenSys.

Despite the recent sell-off, Ether options trading volume has surged to its highest levels in over a month, suggesting that the crypto market is recovering. However, analysts caution that the growing options trading volume won't directly benefit Ether's price. Nevertheless, the growing number of bullish Ether options contracts suggests that traders are betting on a potential price rebound.

To reclaim its previous all-time high, Ethereum must first break through the $3,400 resistance level. A potential move above this level would trigger over $1.09 billion worth of cumulative leveraged short liquidations. Some industry watchers also expect continued institutional buying from Trump's World Liberty Financial protocol, which could further boost Ethereum's price.