The Ethereum spot exchange-traded fund (ETF) was approved by the U.S. Securities and Exchange Commission (SEC) on May 23. Despite the long-awaited decision, the price of Ether (ETH) failed to surpass $3,800 on May 24. This was surprising considering that ETH was trading at $3,943 just two days ago. The decision, especially its timing, caught many by surprise as the market was uncertain about the likelihood of approval.
Ethereum is still 24% below its all-time high.
Some market participants were quick to point out that the SEC has not yet approved each issuer’s individual S-1 statements, a process that could take weeks or months. These delays are hindering Ether’s performance, including the network’s stagnant growth, relatively high transaction fees, and regulatory uncertainty in the United States.
Some of the recent profit-taking likely stemmed from expectations of spot ETF approval, which sparked a 23% rally on May 20th. This is an event commonly referred to as a “news sell.” Traders have been buying ETH in anticipation of the official announcement, especially after the SEC urged exchanges like NYSE and Nasdaq to expedite their 19b-4 filings on May 20.
Despite the hype surrounding the approval of a spot ETF, Ethereum remains 24% below its all-time high of $4,868 in November 2021, indicating a lack of enthusiasm to propel Ethereum’s market capitalization above $445 billion now. indicates that it has been done. Bitcoin (BTC), in particular, is trading 7% below its March 2024 all-time high, suggesting other factors are limiting Ethereum’s performance.
Ethereum network metrics show no signs of improvement.
Usage indicators for the Ethereum network over the past 30 days have shown a lack of growth in decentralized application (DApp) volumes and deposits.
Total value locked (TVL) on the Ethereum network has decreased by 6% since reaching a peak of 18.3 million ETH on May 16. This metric does not take into account DApps that do not require a large deposit base, such as non-fungible tokens (NFTs). ) marketplaces, games, social networks and collectibles. A closer look at the network’s key applications revealed that significant trading volume is concentrated on Uniswap, the leading decentralized exchange (DEX).
Additionally, 7 of the top 10 Ethereum DApps by 30-day trading volume saw a decrease in active addresses. Leader Uniswap saw a 25% drop in activity. Moreover, several DApps have failed to attract more than 4,000 addresses, raising concerns about the overall addressable market on this network, especially when competitors are offering much lower fees.
Related: DeFi exec says Ether ETF will ‘destroy the spirit of crypto’
Verifier arbitrage promotion issues and regulatory uncertainty
Miner Extracted Value (MEV) poses another challenge to Ethereum. This practice, where validators structure transactions within blocks to generate revenue, such as generating slippage on DEX exchanges or upfront NFT mints, results in network congestion and higher gas fees.
Ethereum co-founder Vitalik Buterin addressed this issue on May 17, calling for a protocol that reduces the information available to MEV developers by completely separating the verification process from block content or limiting block producers’ ability to prioritize specific transactions. Level control was proposed. Despite Vitalik’s efforts, it is unlikely that a practical solution will emerge in the coming months.
According to Paul Grewal, Coinbase’s Chief Legal Officer, the approval of a spot ETF is a positive regulatory development that classifies Ether as a digital commodity. However, ongoing regulatory actions against Consensys and the Ethereum Foundation continue to cast a shadow. Some analysts argue that classifying Ether as a non-security instrument still remains an open question until the SEC signs its S-1 registration statement.
Last April, Consensys received a Wells Notice from the SEC regarding MetaMask’s trading and staking services. Moreover, a report by Fortune magazine in March said regulators were investigating companies suspected of having ties to the Ethereum Foundation’s staking services, continuing regulatory uncertainty and further impacting Ethereum’s performance. .
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.