- Ethereum has seen a 23% decline in DApp usage, fueling fears of a potential price crash, despite a recent 9.4% price surge.
- Contributing factors include declining TVL, reduced demand for Ether ETFs, and a slower ETH burn rate due to layer-2 adoption.
Ethereum, along with other cryptocurrencies, is witnessing a surge in positive market sentiment. ETH recently recorded a 9.4% surge, climbing to $2,687 yesterday. In fact, this is the highest the digital asset has gotten in the past 2 weeks.
However, this hasn’t erased great concerns that have capitulated the Ethereum community and investors alike since the second-largest crypto by market cap is still down 25% over the past three months.
Among the factors that have led to the poor performance include the deteriorating performance of recently launched spot Ether exchange-traded funds and a lack of significant demand for ETH. Additionally, the situation has been further complicated due to a sharp 23% decline in decentralized application (DApp) volumes over the last seven days.
This notable decline of 23% in Ethereum’s network Dapp usage has fueled heightened concerns about the potential for an ETH price decline. Notably, the broader market has remained relatively above the waters over the past three months, while on the other hand, Ether has seen a significant decline.
It is worth mentioning that while Ether has recorded declines from $3,450 to $2,590 during that period the total cryptocurrency market capitalization, excluding stablecoins, fell by just 2%.
A closer look at the Ethereum network reveals that this drop in price coincides with a stagnation in its total value locked (TVL), which has remained steady at 19 million ETH over the past two months.
While Ethereum maintains a substantial lead with $48 billion in on-chain deposits, its DApp activity has been outpaced by competitors. BNB Chain and Solana, for example, both experienced notable drops in DApp volume during this period, with BNB Chain falling by 33% and Solana by 26%.
Major DApps on the Ethereum network, such as Uniswap and Balancer, also suffered declines, with Uniswap’s activity dropping by 16% and Balancer seeing a more dramatic 54% drop. Other prominent players like CoW Swap and 1inch Network saw similar reductions, further contributing to the overall decrease in network activity
Lower investor interest in ETH ETF offerings
Another factor that has added fuel to the burning concerns of investors is the lackluster performance of Ether ETFs. Evidencing this is data from Farside investors that indicates that net outflows hit 6% million in the month of October, while its counterpart Bitcoin ETFs saw net inflows of $810 million in the same period.
Another significant factor affecting Ether’s performance is the decline in its supply burn rate. Ethereum’s network upgrades, particularly the implementation of EIP-4844, have led to increased adoption of lower-fee layer-2 scaling solutions. While this has improved network efficiency, it has also reduced the rate at which Ether is burned, contributing to the underperformance of the asset.
Meanwhile, at the time of writing, ETH is swapping hands with $2,634.27 marking a 1.10% surge in the last 24 hours.
