Author: Marcel Pechman, CoinTelegraph; Translated by Tao Zhu, Jinse Finance
Since August 9, ETH has been trading in a tight range above $2,300, maintaining solid support at $2,550. However, this is down 20% from three weeks ago, when ETH closed July above $3,300. The drop comes in the wake of a general drop in cryptocurrency prices, but Ether faces its own particular challenges. The Ethereum network’s decentralized applications (DApps) have seen a significant drop in activity over the past seven days.
Spot Ethereum ETF flows and weak Ethereum network activity limit ETH price gains
Part of Ethereum’s failure to maintain bullish momentum can be attributed to the poor performance of spot Ethereum exchange-traded funds (ETFs). According to data from Farside Investors, the recently launched ETF has experienced a total of $30 million in net outflows since August 9. Despite these outflows, traders remain optimistic that inflows from major players such as BlackRock and Fidelity will offset outflows from Grayscale’s ETHE, although this remains to be seen.
Despite charging significantly higher fees than its competitors, the Ethereum network maintains its lead in total value locked (TVL) and transaction volume. This fee disparity presents a challenge as the user experience on Ethereum does not favor second-layer solutions, creating opportunities for niche markets to gain traction on alternative networks such as Solana, BNB Chain, and TON. In fact, according to DappRadar, none of the top 12 DApps by number of users are based on Ethereum.
Top DApps by 7-day active addresses. Source: DappRadar
Uniswap, Ethereum’s top performing DApp, reported 114,180 active addresses over the past week. In comparison, Pump.fun on Solana attracted 225,110 active addresses over the same period, while Move Stake on BNB Chain attracted 213,010. This comparison does not take into account the highly successful Ethereum layer 2 ecosystem, which includes solutions such as Base, Optimism, and Arbitrum. These layer 2 solutions reached an all-time high in activity on August 17, peaking at 348 transactions per second, according to L2Beat.
Ethereum TVL increases, but on-chain transaction volume decreases
There is no doubt that users value the security of Ethereum's network because Ethereum can perform final settlement, but as transactions are aggregated, this strategy will lead to a decrease in demand for ETH. Therefore, although the Ethereum Layer 2 ecosystem is continuing to grow and develop, the reduction in Ethereum's base layer activity may have a negative impact on ETH prices. DappRadar data shows that Ethereum network activity has dropped significantly in the past week, which provides investors with ample reason to worry.
Top blockchains by 7-day DApss transaction volume. Source: DappRadar
Ethereum’s seven-day trading volume fell sharply by 33% to $39.04 billion. The same trend was seen across its competitors: BNB Chain’s volume decreased by 26%, Solana’s volume decreased by 23%, and TON’s volume decreased by 46% in the same period. This general decline in trading volume indicates a general decline in interest across the industry, rather than a problem specific to the Ethereum network.
On the positive side, according to DefiLlama, Ethereum’s total locked value (TVL) has increased by 9% in 30 days, reaching 18.6 million ETH on August 18. In contrast, BNB Chain’s BNB deposits have fallen by 3%, and Tron’s TRX TVL has fallen by 7% in the same period. This difference reflects investors’ medium-term confidence in Ethereum’s price.
Ethereum network TVL, ETH. Source: DefiLlama
Highlights for the Ethereum network included Symbiotic, a restaking solution with $1.58 billion in deposits, and Magpie Ecosystem, a decentralized finance and yield platform with over $1.37 billion in deposits. While the general decline in cryptocurrency interest, as evidenced by price declines and on-chain metrics, suggests Ethereum may face a longer road to recovery to $3,300, the decline in the number of DApps is not a cause for immediate concern.
