Ethereum’s poor performance has nothing to do with the spot ETH ETF approval
The Ethereum spot exchange-traded fund (ETF) was approved by the US Securities and Exchange Commission (SEC) on May 23. Despite this long-awaited decision, the price of Ether (ETH) failed to hold above $3,800 on May 24. Surprisingly, ETH was trading at $3,943 two days ago. The market was uncertain about the chances of approval, so the decision, especially the timing, caught many off guard.
Ethereum is still 24% below its all-time high.
Some market participants were quick to point out that the SEC has not yet approved the S-1 filings from each individual issuer, a process that could take weeks or months. This delay, among other things, is hampering Ether's performance, including the slow growth of the network, relatively high transaction fees and regulatory uncertainty in the US.
Some of the recent gains may have stemmed from anticipation of the spot's ETF approval, which sparked a 23% rally on May 20, an event often referred to as “sell the news.” Traders bought ETH in anticipation of the official announcement, especially as the SEC urged exchanges such as the NYSE and Nasdaq to expedite 19b-4 filings on May 20.
Despite spot ETF approval, Ether remains 24% below its November 2021 all-time high of $4,868, indicating that the bullishness is not enough to propel Ether's market capitalization above its current $445 billion. In particular, Bitcoin (BTC) is trading 7% below its all-time high since March 2024, suggesting that other factors are limiting Ether's performance.
Ethereum network metrics show no sign of improvement.
Over the past 30 days, Ethereum network usage metrics have shown a lack of growth in decentralized applications (DApps) volumes and deposits.
After reaching a peak of 18.3 million ETH on May 16, the total locked value (TVL) in the Ethereum network has decreased by 6%. ) marketplaces, games, social networks and collectibles. A detailed examination of the network's leading applications reveals a significant amount of focus in Uniswap's highly decentralized exchange (DEX).
What's more, seven of the top ten Ethereum DApps' active addresses, ranked by 30-day volumes, have declined. Uniswap, the leader, saw a 25% decline in activity. In addition, several DApps failed to attract more than 4,000 addresses, which raised concerns about the overall market situation on this network, especially when competitors offer very low fees.
Related: Ether ETFs ‘destroy the crypto ethos', says DeFi exec
The issues related to arbitration are uncertainty related to verifications and controls
Mined Value (MEV) has created another challenge for Ethereum. This practice, where validators orchestrate transactions in a block to make a profit—like creating slippage on DEX exchanges or leading NFT mints—results in network congestion and high gas fees.
Ethereum founder Vitalik Buterin raised this issue on May 17, proposing protocol-level controls to reduce the amount of information available to MEV developers, completely separating the verification process from block contents or limiting its ability to prioritize certain transactions. Despite Vitalik's efforts, a practical solution may not come in the next few months.
The spot ETF's approval is a positive regulatory development, classifying Ether as a digital commodity, according to Coinbase Chief Legal Officer Paul Grewal. However, ongoing regulatory actions continue to cast a shadow over Consensus and the Ethereum Foundation. Some analysts say the classification of Ether as a non-security instrument is an open question until the SEC signs its S-1 filings.
In April, Consensys received a Wells notice from the SEC regarding MetaMask's trading and stock services. Moreover, a report in Fortune magazine in March indicated that the regulator is investigating firms allegedly linked to the Ethereum Foundation for its share services, perpetuating regulatory uncertainty and further affecting Ethereum's performance.
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.
