Ethereum Foundation infighting and declining DApp volumes have pushed the cloud higher than ETH price.

Ether (ETH) has struggled to close above $3,500 since January 7, indicating weakness despite the broader cryptocurrency market rising 6% over the same period. This poor performance may be partly due to lower volumes of Ethereum-based decentralized applications (DApps), which has raised concerns among traders about whether ETH price will continue to lag.

Ethereum underperforms its peers, with on-chain activity down 38%

Ethereum’s on-chain activity has been quite low compared to its peers. According to DappRadar, trading volume fell 38% over the seven-day period to $36.5 billion.

In contrast, activity on the BNB chain surged 112%, while Solana’s increased 36%. Notable decliners in Ethereum included Balancer and Morpho, down 65%, and Uniswap, which saw a 40% drop in trading volume.

Adding to Ethereum’s challenges, it is no longer among the top five blockchains in terms of weekly fees. From January 14th to January 21st, Ethereum’s fee revenue was only $46 million. By comparison, Solana raised $71 million in fees, while contributions from Raydium, Jito and Meteora over the same period brought the total to $390 million, according to DefiLlama data.

There has been growing criticism of Ethereum’s mechanism in favor of layer 2 scaling solutions, especially rollups that aggregate transactions using blob space and low-cost state bridging. The average transaction fee for Ethereum’s base layer is currently $5.50, a level that many DApps consider unsustainable.

The ongoing debate centers on balancing the need for low transaction costs and adequate rewards for ETH staking. Proposed solutions include increasing fees or reducing inflation rates. Ethereum’s leading scaling solutions – Base, Arbitrum, Polygon, and Optimism – currently account for a combined $25.8 billion in weekly decentralized exchange (DEX) trading volume.

According to DefiLlama data, Solana remains the leader in total on-chain volume, recording $118.6 billion in activity over a seven-day period. The surge was sparked by the January 18 launch of the official Trump (TRUMP) memecoin, a record-breaking token approved by US President Donald Trump. As a result, sales for platforms such as Raydium, Orca, and Meteora increased by more than 200%.

Despite this, Ethereum maintains its top spot in the overall value locked (TVL) sector, holding steady at $66 billion per share, according to DefiLlama. Ethereum layer-2 solutions have grown to $8.2 billion in deposits across Base, Arbitrum, Polygon, and Optimism. However, Solana deposits increased 29% in just 7 days, reaching an all-time high of $11.2 billion, adding pressure and uncertainty to ETH investors.

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Investor anxiety due to leadership dispute at Ethereum Foundation

Additional concerns among Ethereum holders stem from internal controversy within the Ethereum Foundation (EF). In May 2024, EF implemented a conflict of interest policy following criticism that some researchers had taken on paid advisory roles at EigenLayer. More recently, on January 21, Ethereum co-founder Vitalik Buterin declared sole authority over EF leadership.

Buterin responded to criticism of His comments follow significant backlash against EF’s managing director Aya Miyaguchi, who has been criticized for inefficiency during her tenure since 2018.

These controversies, combined with reduced staking incentives for ETH, have hampered Ethereum’s market momentum. Meanwhile, Solana (SOL) took advantage of the memecoin craze to challenge Ethereum’s dominance. As a result, there appears to be no clear catalyst that could enable Ether to outperform its competitors in the near term.

This article is written for general information purposes and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.