Ethereum DAP Volumes Down 33% in Week – Is More ETH Price Weakness Ahead?
Ether (ETH) has been trading in the $230 range since August 9, maintaining a strong support level at $2,550. However, this represents a 20% drop from three weeks ago, when ETH closed July above $3,300. This decline follows a broader decline in cryptocurrency prices, but Ether is facing its own unique challenges. The Ethereum network's decentralized applications (DApps) have seen significant activity over the past seven days.
Spot Ether ETF flows and weak Ethereum network activity will limit the ETH price
Part of the reason for Ether's inability to maintain its high momentum is arguably the underperformance of spot Ether exchange-traded funds (ETFs). Recently launched ETFs have experienced a total of $30 million in net outflows since Aug. 9, data from Farside Investors shows. Despite these flows, traders were hopeful that inflows from major players such as BlackRock and Fidelity would counter the outflows from Greyscale's ETHE, although that remains to be seen.
The Ethereum network continues to lead in terms of total value locked (TVL) and transaction volume, despite charging much higher fees than its competitors. This difference in payment poses a challenge, because the user experience on Ethereum does not support secondary solutions, it creates opportunities for virtual markets to draw on alternative networks such as Solana (SOL), BNB Chain (BNB) and TON. In fact, according to Dapradar data, none of the 12 DApps by number of users are based on Ethereum.
Ethereum's best-performing DApp, Uniswap, reported 114,180 active addresses last week. In comparison, Pump.fun on Solana attracted 225,110 active addresses during the same period, while Move Stake on BNB Chain got 213,010. This comparison does not include the highly successful Ethereum Layer-2 ecosystem, which includes solutions such as Base, Optimum, and Arbitrum. L2Beat data shows that these Layer-2 solutions reached a peak activity of 348 transactions per second on August 17.
Ethereum TVL increased, but onchain volume decreased
Users undoubtedly value the security of the Ethereum network for final settlement, but this strategy keeps the demand for ETH low when transactions are finalized. Therefore, a slowdown in Ethereum's base layer activity could negatively impact ETH prices despite continued growth and development in the Layer-2 ecosystem. Dapradar data shows a significant decrease in Ethereum network activity over the past week, giving investors enough reason to worry.
Ethereum showed a massive 33% drop in 7-day volumes, down to $39.04 billion. This trend is reflected in its competitors: BNB Chain saw a 26% decrease in activity, Solana volume decreased by 23%, and Ton experienced a 46% decrease in the same period. This widespread decline in activity reflects a general decline in demand for the sector rather than issues specific to the Ethereum network.
On a positive note, Ethereum's total value locked (TVL) increased by 9% in thirty days, reaching 18.6 million ETH on August 18, according to Defillama data. In contrast, BNB Chain deposits in BNB decreased by 3%, and Tron's TVL in TRX terms decreased by 7% during the same period. This divergence reflects the medium-term investors' confidence in Ethereum's value.
Related: DeFi market bounces back as derivatives ramp up
Highlights of the Ethereum network include Symbiotics, Rebuild, which reached $1.58 billion in deposits, and Magpie Ecosystem, a decentralized finance and product platform, with over $1.37 billion. While the drop in price and the broader decline in cryptocurrency interest, as seen in Onsign's metrics, suggest that Ethereum may have a long way to go to regain $3,300, reduced DApp volumes are not an immediate concern.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
