Ethereum (ETH) price rose 5.5% on May 17, approaching $3,100 for the first time in 10 days. Analysts attribute the rally to lower demand for bond products due to stagnant U.S. retail sales data in April. The data has raised market expectations that the U.S. Federal Reserve (Fed) may cut interest rates to stimulate the economy.
Expansionary actions by central banks are generally seen as optimistic for at-risk markets by increasing the money supply or reducing the cost of credit for businesses and individuals. Investors sought exposure to scarce assets, including cryptocurrencies, which pushed gold to $2,410, 0.8% below its all-time high.
The court ruling has increased confidence among Ethereum investors.
Ethereum’s surge was also driven by an indictment from the U.S. Department of Justice (DoJ) released on May 15. The indictment charges the two with wire fraud and money laundering by manipulating the Ethereum blockchain. “Ethereum is a decentralized blockchain that does not require trusted intermediaries,” the document states, adding, “There is no central actor operating the Ethereum network.”
The court also noted that Ethereum smart contracts enable transactions without the need for a trusted intermediary. These statements boosted the confidence of Ether investors, especially after the U.S. Securities and Exchange Commission issued a notice to Wells on May 4, accusing Wells of alleged securities violations related to its listing and custodian operation of the cryptocurrency on trading platform Robinhood.
According to Orlando Cosme, founder and CEO of Lexproof, this ruling contradicts the regulator’s rule that classified ETH as a security “due to the absence of management or entrepreneurial efforts by others.” This analysis doesn’t change the likelihood of approval for a U.S. spot Ethereum exchange-traded fund (ETF), but it certainly boosts investor morale.
The U.S. SEC is expected to issue a final ruling on VanEck’s request for a spot Ethereum ETF on March 23 and rule on Grayscale’s conversion to an ETHE fund by June 18. Although analysts expect the odds of approval to be less than 35%, regulators believe weakened security measures may have contributed to Ether’s rise above $3,050 on May 17.
Solana co-founder Anatoly Yakovenko praised Ethereum’s network security, emphasizing how impossible it would be to orchestrate a “false state transition or double spend attack.” In a May 17 post, Yakovenko added that Layer 2 scaling reduces costs without compromising security due to the large number of validators and operators on the network.
Simply put, investors have realized that all of the difficulties facing Ethereum, including high transaction fees and lackluster efforts to increase scalability, are actually a decision to prioritize security and decentralization. Meanwhile, competitors Solana (SOL) and BNB Chain (BNB) have chosen solutions that allow for higher processing capacity despite the advantages of increased reliance on a smaller number of entities.
Ethereum Network’s Dominance Still Undisputed
Ethereum’s strength becomes clear when analyzing its dominance in decentralized application (DApps) activity. The growth of layer 2 solutions like Base, which quickly gained traction due to its low fees and integration with Coinbase, the largest cryptocurrency exchange in the US, further strengthens Ethereum’s ability to become a global payments layer.
Ethereum’s 30-day DApp trading volume of $181.5 billion is more than seven times that of its direct competitor, the BNB chain. More importantly, this trading volume only decreased by 3% compared to the previous month, with BNB Chain and Solana recording volume decreases of 52% and 41%, respectively.
Related: U.S. Senate passes resolution to overturn SEC cryptocurrency rules for banks
Analyzing the unique active addresses associated with DApps (UAW) yields similar results. Ethereum is up 3% in 30 days, while BNB Chain and Solana have seen sharp declines. Highlights on the Ethereum network include Balancer with a 34% volume increase in 30 days, Morpho Optimizers with an 80% increase in volume, and DODO with a 61% volume increase.
Essentially, even if the odds of US spot Ethereum ETF approval remain low, investors are realizing that the network’s dominance in the DApp ecosystem will not be affected. This realization contributed to the rise in ETH price on May 17th.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.