Ethereum Price Prediction: TVL Drops by 15% Despite Pectra Upgrade – Is ETH’s Rally Over?

Ethereum (ETH) has gone up by 0.7% in the past 7 days as the token has entered a stage of consolidation following the strong uptick triggered by the successful implementation of the Pectra upgrade.

Pectra introduced significant technical improvements to the Ethereum blockchain including an increase in the number of blobs – datasets – that can be included in an ETH block.

This is a major efficiency boost for layer-2 protocols like Arbitrum as they can now offer faster transaction execution speeds at a lower cost.

Moreover, Pectra also implements automatic token burns by using a portion of the network’s collected gas fees. Supports of this technical upgrade say that this could eventually make Ethereum a deflationary token.

However, despite these positive changes to the network’s architecture, its DeFi ecosystem, the one that should benefit the most from this development, has experienced net outflows according to data from DeFi Llama.

Network TVL Drops by 15% Despite Pectra

Ethereum’s network total value locked (TVL) expressed in ETH has dropped by 15% from its April 8 peak. The total figure currently stands at 24.84 million ETH compared to 29.94 million ETH tokens back then.

Ethereum Total Value Locked (TVL) in ETH – Source: DeFi Llama

Pectra should have actually brought in more capital from investors who would now take advantage of the network’s lower fees and faster transaction execution speeds. However, it does not seem to be achieving that goal yet.

Despite the poor performance of this on-chain metric, open interest (OI) in ETH futures has climbed near a record again at around 14.33 million ETH. The all-time high at this point currently sits at 14.75 million ETH.

Speculative activity is still rampant in the marketplace according to these futures. Interestingly, short sellers may now be contributing to increased open interest as the latest declines plus the tense situation in the Middle East favor a bearish outlook and draw bears to open short positions in ETH.

ETH Could Rise to $4,000 Again Based on Historical Patterns

Looking at Ethereum’s daily price chart we can identify a clear consolidation pattern that emerged after the post-Pectra rally.

This pattern resembles a similar formation seen in October last year that was accompanied by range-bound price action and erratic signals in the short-term exponential moving averages (EMAs).

ETH/USD Daily Chart (Bitstamp) – Source: TradingView

Back then, two specific signals marked the beginning of Ethereum’s push to $4,000. The first and earliest of the two was a bullish crossover between the 9-day and 21-day EMAs – also known as a ‘golden cross’ – that was accompanied by strong volumes.

The second – and latest signal of the two – was a move to overbought territory in the Relative Strength Index (RSI).

Although most traders typically interpret this as a sign that momentum may be reaching a phase of exhaustion, it is also an indication that the trend’s momentum is quite strong when the price comes from breaking out of a consolidation pattern.

A bullish breakout above the $2,900 level that breaks through this consolidation rectangle could push ETH to $3,000 first and then to $4,000 as it did the last time if positive momentum gains enough traction.

However, in these challenging market conditions with so many potential bearish catalysts, including the on-chain data we reviewed, a bearish outcome is still on the table. This will be confirmed if a drop below $2,300 occurs.