Ethereum’s Value Accretion Narrative Faces Pressure After 19% Drop in ETH DApp Volumes

ETH price struggles to gain momentum as DApp volumes decline, keeping Ether hovering around the $2,250 support level.

Source: www.inx.co

Ether has struggled to surpass the $2,450 mark for over two weeks, and the recent 17% decline in Ethereum's decentralized application (DApp) activity has raised concerns, especially regarding its impact on the layer 2 ecosystem. Traders are now questioning whether the current support level of $2,250 can hold. On a brighter note, Ethereum continues to be the leading platform in terms of activity and development, although competitors are steadily closing the gap.

Soaring Ethereum Transaction Fees Weighing Down Ether Price

Lower transaction volumes can negatively affect the demand for Ether by decreasing fee revenue or indicating that users may be shifting to other networks. One ongoing challenge for Ethereum is its relatively high transaction costs, currently averaging around $1.70. While scalability solutions have somewhat alleviated this issue, they have also introduced additional complexity for users and raised concerns about the long-term sustainability of the network's security.

From an investment perspective, staking Ether has become less appealing, as its 3.3% yield falls short of the 4.6% return offered by a US 6-month Treasury bill. Currently, only 28.5% of circulating ETH is staked, compared to 65.8% for Solana, 56.9% for Avalanche (AVAX), and 62.7% for Cardano (ADA). Consequently, Ethereum staking is no longer a significant driver of inflows, providing fewer incentives for participation in the validation process.

While staking is a significant contributor to Ethereum’s total value locked (TVL), other applications such as lending, trading, and synthetic assets also require ETH deposits. Thus, a smaller proportion of tokens participating in staking doesn’t necessarily indicate a negative outlook for Ether's price. Ethereum continues to lead in TVL, with $44.15 billion locked—almost ten times more than BNB Chain or Solana.

Although the 19% weekly drop in Ethereum DApp volumes may appear concerning, it's important to compare this with competing blockchains to fully understand its implications for fees and active addresses. For example, during the same period, Solana's DApp volumes rose by 24%, and BNB Chain experienced a 23% increase. This suggests that the decline in Ethereum's DApp activity may not signify a broader slowdown in the cryptocurrency market.

Not All Ethereum Network Metrics Indicate Reduced Activity

Among the notable negative trends on the Ethereum network was the performance of major decentralized exchanges (DEXs). Uniswap experienced an 18% drop in volume over the past week, CoW Swap saw a 29% decline, and 1inch also reported an 18% decrease. In contrast, BNB Chain’s Venus Protocol boasted a remarkable 236% volume increase during the same period, while the TON network's Bemo liquid staking DApp registered a 54% gain.

Ethereum's leading layer 2 solutions also faced reduced activity between September 10 and September 17. According to L2Beat, transactions per second fell from 119 to 94 during this timeframe, with platforms like Arbitrum One, Linea, Mantle, Immutable X, and Scroll standing out for their declines. Despite this slowdown in transaction speed, Ethereum’s layer 2 total value locked (TVL) remained relatively stable at 14.6 million ETH.

Other network metrics showed resilience as well. Ethereum's overall TVL held steady at 18.9 million ETH between September 10 and September 17. Likewise, the number of active addresses for Ethereum DApps remained around 425,000, indicating that despite falling volumes, there are no clear signs of investors leaving the network. However, a concerning trend is the increase in Ether deposits on exchanges, which rose from 12.02 million ETH to 12.24 million ETH as of September 17, according to data. A higher volume of coins on exchanges often indicates a greater likelihood of short term selling pressure, potentially impacting price trends.

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

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.