The story of Ethereum’s value increase under pressure after ETH DApp trading volume drops 19%

Ether (ETH) has struggled to break above $2,450 for more than two weeks, and the recent 17% drop in Ethereum decentralized application (DApp) activity has raised concerns, particularly as it impacts the Layer 2 ecosystem. Traders are now questioning whether the current $2,250 support level can hold for much longer.

On the positive side, Ethereum is still the dominant platform in terms of activity and development, but competitors are gradually gaining the upper hand.

Ethereum Transaction Fees Rise, Negative Impact on Ether Price

A decrease in transaction volume could negatively impact demand for Ether as it could signal a decrease in fees or a shift of users to other networks.

One of Ethereum’s ongoing challenges is its relatively high transaction fees, currently averaging $1.70. Scalability solutions have helped alleviate this problem to some extent, but they have also introduced additional complexity for users and raised questions about the long-term sustainability of the network’s security.

From an investment perspective, Ethereum staking has not been particularly attractive, as the 3.3% yield is lower than the 4.6% yield offered by the 6-month U.S. Treasury note. It is worth noting that only 28.5% of the ETH in circulation is currently staked, compared to 65.8% for Solana (SOL), 56.9% for Avalanche (AVAX), and 62.7% for Cardano (ADA). As a result, Ethereum staking is no longer a major driver of inflows, and the incentive to participate in the validation process has diminished.

While staking plays a significant role in Ethereum’s total locked value (TVL), other applications such as lending, trading, and synthetic assets also require ETH deposits. Therefore, a small percentage of tokens participating in staking is not necessarily a negative indicator for the price of ETH. Ethereum still leads in TVL, with $44.15 billion locked, nearly 10x more than BNB Chain (BNB) or Solana.

While it may seem surprising that Ethereum DApp volumes have dropped by 19% week-on-week, it is essential to compare this to competing blockchains to assess the overall impact on fees and active addresses. For example, Solana’s DApp volumes have increased by 24% over the same period, while BNB Chain’s has increased by 23%. This suggests that the decline in Ethereum DApp activity may not reflect a general downturn in the cryptocurrency market.

Not all Ethereum network metrics are showing a decline in activity.

One of the notable negative developments on the Ethereum network has been the performance of major decentralized exchanges (DEXs). Uniswap has seen its volumes drop by 18% over the past seven days, CoW Swap has seen a 29% drop, and 1inch has seen a 18% drop. In contrast, Venus Protocol on the BNB Chain has seen a whopping 236% volume increase over the same period, while Bemo liquidity staking DApp on the TON network has seen a 54% increase.

Ethereum’s top layer 2 solutions also saw a drop in activity between September 10 and September 17. According to L2Beat, transactions per second dropped from 119 to 94 during this period. Layer 2 platforms including Arbitrum One, Linea, Mantle, Immutable X, and Scroll were among the negative highlights. However, despite the drop in transaction speeds, Ethereum’s layer 2 total value locked (TVL) remained relatively stable at 14.6 million ETH.

Other network metrics have also remained stable. Ethereum’s total TVL has remained constant at 18.9 million ETH between September 10 and September 17. Likewise, the number of active addresses for Ethereum DApps is close to 425,000, showing no clear signs that investors are abandoning the network despite the drop in transaction volume.

relevant: Ethereum Fractal Hints at $3,300 as Analyst Says ETH Price Is ‘Rising’

However, one trend that is concerning is the increase in Ether deposits on exchanges. According to Glassnode data, as of September 17, it increased from 12.02 million ETH to 12.24 million ETH. The higher the coin trading volume on an exchange, the more likely it is that there will be short-term selling pressure, which can have a negative impact on the price trend.

The 17% drop in weekly Ethereum DApp volumes may be cause for concern, but this alone is unlikely to cause Ether’s price to fall below the $2,250 support level, especially given the stability of active users and TVL. Investors should continue to closely monitor network activity, but for now, there appears to be no immediate risk from this decline.