Here’s why ETH’s underperformance is not linked to Shanghai

• Analysts argued that the altcoin’s recent letdown could either be linked to the nearing Shanghai upgrade or not
• ETH may not rally in the short term as traders are torn between longs and shorts

According to Hal Press, Ethereum’s [ETH] underwhelming performance in recent times could be a result of some faults in the nearing Shanghai Upgrade. Compared to other top altcoins with a lower market cap, ETH has not been equal to the trend.

ETH is, in my opinion, the crypto asset that has seen its fundamentals strengthen most so far this year with the ecosystem as vibrant as ever and devs executing at an extremely high level. Yet, it’s one of the worst performers due to Shanghai “overhang”. This is not sustainable.

— Hal Press (@NorthRockLP) February 28, 2023

How much are 1,10,100 ETHs worth today?

The founder and lead educator at North Rock Digital opined that the upgrade “overhang” was not sustainable despite admitting the exceptional work put in by the blockchain developers. This opinion came after Ethereum developers confirmed success with the Sepolia Testnet.

“The blame is not on the upgrade”

On the contrary, BlockTower Capital founder Ari Paul did not align with Press’ judgment. In defense of his opposition, Paul mentioned that ETH has never capitulated and the cryptocurrency’s underperformance was expected.

Not because of Shanghai imo. It’s *because* ethereum fundamentals have been so strong consistently over last year. ETH never “capitulated”, so it’s gonna underperform everything that did on the bounce from lows. Also this dynamic: little new money coming into crypto. /1

— Ari Paul ⛓️ (@AriDavidPaul) February 28, 2023

He also linked the performance to the Ethereum market cap, noting that altcoins with smaller market capitalization tended to grow faster in value. Paul advanced in his position, saying, 

“Hard for large caps to meaningfully pump.  But some $100m or $1b or even $5b market cap coin?  That can easily double just from minor rotational flows within crypto (and can fall 80% just as easily.)”

Press’ response showed that he was not in complete disagreement with Paul. However, he noted that Bitcoin [BTC], despite a larger market cap, had also outperformed ETH. Regardless of doubts in some corners, the Ethereum blockchain still topped others in terms of Total Value Locked (TVL). THE TVL evaluates the health status of a project and the unique deposits it has gained into its underlying protocols.

Source: DeFi Llama

At the time of writing, Ethereum’s TVL was $29.4 billion based on DeFi Llama data. This was far above the worth of second-placed Tron [TRX]. But the performance of the second-largest blockchain concerning the TVL looked static in the last 30 days.

ETH Traders in close long and shorts

While ETH exchanged hands at $1,654 — a tiny uptick in the last 24 hours, traders mostly preferred to long the cryptocurrency. According to Coinglass, the long vs. short ratio was 1.21 at press time. An in-depth analysis of the data revealed that 54.68% of traders opened long positions while 45.32% went short.

Source: Coinglass

But can ETH sustain an uptrend in the short term? Well, the daily chart showed that accumulation around ETH has been on the low side. This was the interpretation of the Chaikin Money Flow (CMF) 0.02 value.

However, it might be difficult for the altcoin to begin a notable rally soon based on the signals by the Directional Movement Index (DMI). As of this writing, the -DMI (red) and +DMI (green) were 18.44 and 20.30 respectively. 

Is your portfolio green? Check out the Ethereum Profit Calculator

The Average Directional Index (ADX), which would have created a strong or weak movement, was also not close to 25. At press time, the ADX (yellow) was 15.99.

Source: TradingView

The Ethereum Shanghai upgrade could happen anytime soon. However, the event could yield a positive or negative reaction from ETH, since historical development strides on the blockchain resulted in either.