Why Ethereum Price Drops Post-Dencun Upgrade?

• The Dencun Ethereum upgrade, targeting cost-effectiveness, was successfully rolled out on Wednesday.
• After the upgrade, Ether’s price declined 3.6% from $4,083 to $3,936.

On Wednesday, the long-awaited Dencun Ethereum upgrade finally went live, promising cost-effectiveness within the network ecosystem. However, the deployment didn’t seem to favor Ether’s (ETH) price, as it dipped by 3.6% from $4,083 to $3,936, according to CoinMarketCap data.

Further, Singapore-based digital asset trading firm QCP Capital has warned about the potential corrections in Ether’s price. They’ve noted a concerning shift in “risk reversals,” turning negative for the ETH price. This shift is primarily attributed to increased interest in put options, which serve as a hedge against potential losses for those betting on price increases.

Ethereum Price Correction Soon?

Despite these cautionary signals, Ethereum remains strong in the crypto market, closely trailing Bitcoin in terms of price movements. Currently trading above the key resistance of $3,900, Ethereum has seen a 4.12% increase over the past week.

Historically, network upgrades such as Bitcoin’s Taproot and the Ethereum merge have typically had minimal impact on pricing during bearish and sideways market conditions. However, given the current market conditions, there is a possibility of price reflexivity on Ethereum and its Layer 2s.

Ethereum (ETH) Price Chart (Source: CoinMarketCap)

At the time of writing, Ethereum is trading at $3,971 with a market cap of $476 billion. However, the price of Ether experienced a 1.69% decline in the last 24 hours, alongside a 15.5% decrease in daily trading volume to $22 billion.

Further, the Dencun upgrade specifically targets Layer 2 (L2) networks, such as Arbitrum (ARB), Polygon (MATIC), and Coinbase’s Base, all of which interconnect with Ethereum.