Ethereum price remains strong, but DApp activity is down 23%, raising concerns.

Ethereum (ETH) price surged 9.4% from October 10 to October 15, reaching a two-week high of $2,687. However, despite this recent rise, Ether remains down 25% over the past three months. This reflects investor disappointment with the recently launched Ether spot exchange-traded fund (ETF) and the overall lack of demand for ETH, despite Ethereum’s focus on tier prioritization. Two scaling solutions.

Over the past seven days, the Ethereum network has seen a 23% drop in on-chain decentralized application (DApp) volume, and this decline has sparked speculation that the Ethereum price could follow suit.

Declining on-chain activity sparks concern among Ether investors

While a variety of factors have had a negative impact on the price of Ethereum since mid-July, it is particularly noteworthy that the overall cryptocurrency market capitalization has remained relatively stable over the same three-month period.

The total cryptocurrency market capitalization excluding stablecoins decreased by 2% over 90 days to $2.09 trillion, but the price of Ethereum fell significantly from $3,450 to $2,590. This widening gap suggests that investor sentiment regarding Ethereum’s potential has deteriorated. Therefore, it is important to investigate the causes of this poor performance. One contributing factor could be the decline in Ethereum’s total value locked (TVL).

The latest data from DefiLlama shows that Ethereum’s total value locked (TVL) has remained stagnant at around 19 million ETH over the past two months. This is not particularly surprising considering that Ethereum’s $48 billion in on-chain deposits give it a dominant market share of 55% in the cryptocurrency sector. In comparison, the TVL of the BNB chain also remained relatively stable at approximately 8.1 million BNB during the same period.

Therefore, it is worth assessing how the recent decline in Ethereum network DApp volume compares to its competitors.

Ethereum’s 7-day DApp trading volume decreased to $21.5 billion. However, the BNB Chain (BNB) is down 33%, and the Solana (SOL) network is down 26% in trading volume compared to last week. Despite the lackluster performance, there is no clear indication from this data alone that Ether’s price will decline significantly.

Notable areas of weakness within the Ethereum network include Uniswap, which saw a 16% decline in activity in the week ending October 14, and Balancer, which saw a dramatic 54% decline in activity. Other major players such as CoW Swap and 1inch Network also recorded weak performance, with on-chain volumes falling by 18% and 23% respectively.

Declining ETH ETF Demand and Reduced Supply Burn Affects Investor Arguments

In addition to these factors, some of the frustration among Ether investors stems from the lack of inflows into US-based spot Ether ETFs. These ETFs recorded net outflows of $6 million in October, according to data from Farside Investors. In contrast, the similar Bitcoin (BTC) ETF recorded net inflows of $810 million between October 11 and October 14, indicating investor demand is present but currently favoring Bitcoin over Ethereum products. suggests.

Ethereum investors are disappointed as supply continues to increase despite high network usage. Vitalik Buterin acknowledged this problem in an October 14 blog post and suggested that solutions like single-slot finality could help improve transaction times. Currently, Ethereum transactions take around 15 minutes, causing congestion and limiting network efficiency.

relevant: Vitalik Buterin sells $1.6 million more meme coins he pledged to donate to charity

In comments to Cointelegraph, a Binance spokesperson explained that recent Ethereum network upgrades have “increased the adoption of low-fee layer 2 solutions” and consequently reduced ETH supply burn rate. These changes have gained momentum since EIP-4844 was activated in April 2023. EIP-4844 is a development specifically designed to improve the efficiency of Layer 2 rollups by bundling and processing transactions more effectively.

While the decline in Ethereum DApp volume essentially merely reflects broader cryptocurrency market trends, the adoption of lower-fee layer 2 solutions and reduced ETH supply consumption have contributed to Ether’s recent underperformance.