Ethereum (ETH), which experienced a major rally after Bitcoin's $123,000 ATH, has experienced a decline in recent days.
While the general rise in Ethereum is expected to continue where it left off, one analyst said that ETH may be heading towards an unstable period in the near term.
Markus Thielen, an analyst at 10X Research known for his successful predictions, said that Ethereum is at risk of a near-term decline.
Thielen noted that increasing borrowing rates on the ETH network could create ripple effects throughout the Ethereum ecosystem.
The analyst stated that with the increasing interest in Ethereum, the cost of borrowing has increased and technical indicators point to overvaluation.
On this point, Thielen noted that usage of the Aave lending platform has increased from 86% to 95% since July 8 as borrowing exceeds supply in the lending pool.
The variable cost of borrowing wETH has increased and is currently not profitable to borrow ETH, so for the rise to continue, the number of ETH borrowers via Aave needs to decrease.
However, if this situation persists, it could trigger a meaningful pullback in Ethereum, especially if funding rates and positioning remain tight.”
Thielen added that although he presented a negative picture for Ethereum in the short term, he expects more positive conditions and an increase for ETH after September.
*This is not investment advice.
