Ethereum (ETH) Update

Ethereum (ETH) has witnessed a notable rally following Bitcoin’s peak at $123,000, but recently it has faced a decline.

Despite expectations for a continued rise, analyst Markus Thielen from 10X Research warns of a possible unstable period ahead for ETH. He suggests that increasing borrowing rates within the ETH network could disrupt the Ethereum ecosystem.

Thielen indicates that the heightened interest in Ethereum has led to rising borrowing costs, and technical analysis points to overvaluation. Notably, usage of the Aave lending platform has surged from 86% to 95% since July 8, as borrowers exceed available supply in the lending pool.

Currently, the variable cost of borrowing wETH is high, making it unprofitable to borrow ETH. For ETH to maintain its upward momentum, the number of borrowers on Aave must decrease. If the current conditions continue, a significant pullback in Ethereum prices could occur, especially if funding rates and market positioning remain tight.

Despite his short-term bearish outlook for Ethereum, Thielen anticipates a more favorable environment and price growth for ETH post-September.

*This is not investment advice.