Ethereum Foundation Internal Conflict and Falling DApp Volumes Put Cloud on ETH Price
Ether (ETH) has struggled to close above $3,500 since January 7, indicating weakness despite the broader cryptocurrency market gaining 6% over the same period. This underperformance is partly due to a decrease in the volume of decentralized applications (DApps) based on Ethereum, raising concerns that the price of ETH will continue to lag among traders.
Ethereum onchain activity is down 38%, underperforming its peers.
The on-chain activity on Ethereum is very low compared to its peers. In a period of seven days, volumes fell 38% to $ 36.5 billion, Dapradar.
Top blockchains ranked by 7-day DApps volumes, USD. Source: Dapradar
On the contrary, the activity on the BNB chain increased by 112%, Solana gained 36%. Notable decliners on Ethereum included Balancer, which fell by 65%, and Morphone and Uniswap, which dropped by 40%.
Adding to Ethereum's challenges, it failed to rank among the top five blockchains in weekly payouts. Between January 14 and January 21, Ethereum generated only $46 million in payments. Solana raised $71 million in comparison, and contributions from Radium, Gito, and Meteora combined for a total of $309 million over the same period, according to Defillama data.
Criticism has grown over Ethereum's methodology for supporting layer-2 balancing solutions, particularly using blob space and low-cost state bridging to aggregate transactions. Average transaction fees at Ethereum's base layer are at $5.50, a level that many DApps find unsustainable.
The ongoing debate centers on balancing low transaction costs to sufficiently reward ETH reserves. Proposed solutions include increasing fees or reducing inflation. Ethereum's leading measurement solutions – Base, Arbitrum, Polygon and Optimism – currently account for $25.8 billion in weekly decentralized exchange (DEX) volumes.
Weekly DEX Volumes, USD Source: Defillama
To put things into perspective, Solana remains the leader in total onchain volumes, recording $118.6 billion in activity in 7 days, according to Defillama data. This increase was triggered by the official Trump (TRUMP) memecoin on January 18, a record-breaking token approved by the President of the United States, Donald Trump. As a result, platforms like Radium, Orca, and Meteora have seen increases of 200% or more.
Despite this, Ethereum is locked in the top position in terms of total value, holding steady for more than a week at $66 billion, according to Defillama. Ethereum Layer-2 solutions also saw deposits in Basic, Arbitrum, Polygon and Optimum grow to $8.2 billion. However, Solana deposits have increased by 29% in 7 days, reaching a peak of $11.2 billion, which has increased pressure and uncertainty on ETH investors.
Related: Trump and Melania memecoins attract investors for the first time – survey
Management disputes in the Ethereum Foundation have shocked investors
Additional concerns among Ethereum owners stem from the internal debate within the Ethereum Foundation. In May, the foundation implemented a conflict-of-interest policy following criticism that some of its researchers had taken paid consulting roles at EigenLayer. Recently, on January 21, Ethereum founder Vitalik Buterin declared sole authority over the leadership of the foundation.
Buterin responded to criticism of X, stating that he would remain responsible for management decisions until reforms establish a “proper board”. His comments followed a significant backlash against Ethereum Foundation CEO Aya Miyaguchi, who has been accused of inefficiency during his tenure since 2018.
These controversies, combined with reduced stock incentives for ETH, have hampered Ethereum's market activity. Meanwhile, Solana (SOL) has capitalized on memecoin's frustrations by challenging Ethereum's dominance. As a result, there seems to be no clear incentive for Ether to outperform its competitors in the short term.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
