As a seasoned researcher with over two decades of experience in the ever-evolving world of cryptocurrencies, I find myself intrigued by the recent performance of Ether (ETH). While it’s heartening to see ETH surging 9.4% within a week, reaching its highest level in two weeks, it’s disheartening to observe that this growth has been overshadowed by a 25% decline over the past three months.
Over the course of five days, from October 10th to the 15th, I witnessed a remarkable increase in the price of Ether (ETH), climbing an impressive 9.4% and peaking at $2,687 – its highest point in two full weeks. Nevertheless, this recent spike doesn’t overshadow the fact that Ether has dipped by 25% over the past three months, signifying some investor discontent with the recently introduced spot Ether exchange-traded funds (ETFs) and a general lack of interest in ETH. Despite Ethereum’s relentless pursuit of layer-2 scaling solutions, the demand for ETH seems to be lacking, which could potentially be due to the underwhelming performance of these newly launched ETFs.
Over the last week, the usage volume of decentralized applications (DApps) built on the Ethereum network decreased by approximately 23%. This decrease has ignited discussions among investors about whether Ether’s price might also experience a decline as a result.
Drop in onchain activity sparks concerns for Ether investors
Over the past three months since mid-July, while Ether’s value has been significantly impacted by several unfavorable factors, it’s worth noting that the total value of all cryptocurrencies (the market capitalization) has generally stayed steady during this same timeframe.
Leaving out stablecoins, the overall cryptocurrency market value decreased by a modest 2% to reach $2.09 trillion during the past three months. In contrast, Ether’s price saw a substantial drop, going from $3,450 to $2,590. This increasing disparity implies that investors’ optimism about Ether has waned. As such, it would be wise to examine the potential causes for this subpar performance. One possible factor could be a decline in Ethereum’s Total Value Locked (TVL).
Over the last two months, the amount of Ethereum locked in decentralized finance (Defi) platforms, as per DefiLlama’s latest data, has held steady at roughly 19 million ETH. This figure, which amounts to around $48 billion, makes up about 55% of the market share in the cryptocurrency sector and isn’t cause for significant concern. To put this into perspective, BNB Chain’s total value locked (TVL) has also remained fairly steady at close to 8.1 million BNB during the same timeframe.
Indeed, it’s beneficial to examine the extent to which the drop in Decentralized Applications (DApp) volumes on the Ethereum network aligns with those of its rival platforms.
In the past week, the total volume of transactions on Ethereum‘s DApps declined to approximately $21.5 billion. Interestingly, other platforms such as BNB Chain (BNB) and Solana (SOL) network also experienced similar decreases – BNB Chain saw a drop of 33%, while Solana’s volumes were 26% lower than the previous week. Despite this downturn in performance, it is unclear if Ether’s price will experience a substantial decrease solely based on this data.
Significant areas of concern within the Ethereum network are noticeably Uniswap, which witnessed a 16% reduction in activity during the week ending October 14th, and Balancer, where activity plummeted by an impressive 54%. Other prominent participants like CoW Swap and the 1inch Network also showed weaker performance, with on-chain volumes decreasing by 18% and 23%, respectively.
Reduced ETH ETF demand and a drop in the supply burn rate impact investors’ thesis
Beyond the mentioned causes, some of the discontent among Ether investors is due to the limited investment into U.S.-based spot Ether Exchange-Traded Funds (ETFs). As per Farside Investors’ data, these ETFs experienced a net withdrawal of $6 million in October. Conversely, Bitcoin (BTC) ETFs recorded net investments of approximately $810 million from Oct. 11 to Oct. 14, implying that investor interest is present but appears to be leaning more towards Bitcoin rather than Ether-related instruments at this time.
Investors in Ethereum are disheartened because its supply is still expanding even as it experiences high levels of usage across the network. In a blog post dated October 14th, Vitalik Buterin acknowledged this problem and proposed that enhancing transaction speeds through methods like single-slot finality might offer a solution. At present, Ethereum transactions can last approximately 15 minutes, which results in overcrowding and reduces the network’s overall performance.
In response to queries on CryptoMoon, a Binance representative clarified that the latest Ethereum network updates have boosted the utilization of cost-effective, second-layer technologies like Optimistic Rollups and zk-Rollups. This trend has slowed down the rate at which Ether is destroyed through burn mechanism. The impetus behind this change can be traced back to the implementation of EIP-4844 in April 2023, an innovation aimed at improving the performance of layer-2 rollups by optimizing transaction processing and batching.
Fundamentally speaking, although the drop in transactions on Ethereum DApps mirrored the overall patterns within the cryptocurrency market, the growth in the use of cheaper layer-2 alternatives and the decreased burning of ETH coins have been key factors contributing to Ether’s recent lackluster performance.
As a seasoned professional with years of experience in the financial industry, I feel compelled to emphasize that this article is intended for general informational purposes only and should not be construed as legal or investment advice. The perspectives, insights, and opinions expressed here are my own and do not necessarily reflect those of CryptoMoon. It’s crucial to always seek the guidance of a financial advisor or legal expert when making important decisions regarding your investments and financial matters. My personal experiences have taught me that it’s essential to approach such topics with caution, as they can carry significant risks and implications.
Read More
- DYM PREDICTION. DYM cryptocurrency
- ZK PREDICTION. ZK cryptocurrency
- CYBER PREDICTION. CYBER cryptocurrency
- JASMY PREDICTION. JASMY cryptocurrency
- POPCAT PREDICTION. POPCAT cryptocurrency
- SKEY PREDICTION. SKEY cryptocurrency
- TURBO PREDICTION. TURBO cryptocurrency
- Top gainers and losers
- BNB PREDICTION. BNB cryptocurrency
- XRP PREDICTION. XRP cryptocurrency
2024-10-16 00:26