Ether (ETH) has been trading in a narrow $230 range since August 9, holding solid support at $2,550. However, this is a 20% drop from three weeks ago, when ETH closed above $3,300 in July. While this drop is in line with the broader contraction in cryptocurrency prices, Ether is facing its own unique challenges. Decentralized applications (DApps) on the Ethereum network have seen a significant decline in activity over the past seven days.
Spot Ether ETF flows and weak Ethereum network activity limit ETH price gains.
Part of the reason Ether has failed to maintain its bullish momentum could be the underperformance of spot Ether ETFs (exchange-traded funds). According to data from Farside Investors, recently launched ETFs have experienced net outflows totaling $30 million since August 9. Despite these outflows, traders are optimistic that inflows from major players like BlackRock and Fidelity will offset Grayscale’s ETHE outflows, but that remains to be seen.
The Ethereum network continues to lead in terms of total value locked (TVL) and transaction volume, despite charging significantly higher fees than its competitors. This fee differential poses a challenge because Ethereum’s user experience does not favor second-tier solutions, leaving niche markets open for alternative networks like Solana (SOL), BNB Chain (BNB), and TON to gain traction. In fact, according to DappRadar data, none of the top 12 DApps by user count are built on Ethereum.
Uniswap, the most successful DApp on Ethereum, reported 114,180 active addresses last week. In comparison, Solana’s Pump.fun attracted 225,110 active addresses in the same period, while Move Stake on the BNB chain recorded 213,010. This comparison does not take into account the highly successful Ethereum Layer 2 ecosystem, which includes solutions like Base, Optimism, and Arbitrum. According to data from L2Beat, these Layer 2 solutions reached their all-time high of 348 transactions per second on August 17.
Ethereum TVL Increases but On-Chain Transaction Volume Declines
While users undoubtedly value Ethereum’s network security for final settlement, this strategy reduces the demand for ETH as transactions are aggregated. As a result, a decrease in Ethereum’s base layer activity could have a negative impact on the price of ETH, despite continued growth and development within the layer 2 ecosystem. DappRadar data shows a significant decrease in Ethereum network activity over the past week, giving investors ample reason to be concerned.
Ethereum has seen a massive 33% drop in 7-day volume, dropping to $39.04 billion. This trend has been echoed by its competitors: BNB chain has seen a 26% drop in activity, Solana has seen a 23% drop in volume, and TON has seen a 46% drop over the same period. This widespread decline in activity is not just a problem for the Ethereum network, but rather suggests a general decline in interest in the sector.
On a positive note, Ethereum’s total value locked (TVL) has increased by 9% over the past 30 days, reaching 18.6 million ETH on August 18 (according to DefiLlama data). On the other hand, BNB deposits on the BNB Chain have decreased by 3%, while Tron’s TRX-based TVL has decreased by 7% over the same period. This difference reflects the confidence of mid-term investors in the price of Ethereum.
relevant: DeFi Markets Recover as Derivatives Surge
Key features of the Ethereum network include Symbiotic, a re-staking solution that has achieved $1.58 billion in deposits, and MagFi Ecosystem, a decentralized finance and yield platform that has surpassed $1.37 billion. The overall decline in crypto interest, as seen in the price drop and on-chain metrics, suggests that Ethereum may face a longer path to recovering $3,300, but the reduced DApp volume is not a cause for immediate concern.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.