Ether has been unable to surpass the $1,920 mark for the past 16 days, with the previous breakout attempt in early May lasting less than a day. This prolonged period below $1,920 began on April 21, over 30 days ago.
One contributing factor to investors’ decreased interest may be the high average transaction fee of $8.80 on the Ethereum network. However, the macroeconomic climate has also played a significant role. JPMorgan Chase CEO Jamie Dimon recently commented on the unpredictable outcome of the Federal Reserve’s monetary policy, leading to tightening credit conditions.
The ongoing standoff between the US administration and Congress regarding the debt ceiling has further dampened institutional investor sentiment towards crypto. CoinShares’ report reveals that digital asset investment products witnessed outflows of $232 million in the past five weeks. These indicators impact Ether’s price and indicate reduced demand for its decentralised finance ecosystem. The Ethereum network’s limited processing capabilities have resulted in high gas fees, diminishing the usage of smart contracts. Although the average transaction fee has remained above $8 in the past five weeks, its impact initially went unnoticed.
Ethereum network applications’ total deposits in ETH. Source: DefiLlamaThe total value locked (TVL) in the Ethereum network has remained stable at 15.1 million ETH compared to four weeks ago but is approaching its lowest level since August 2020. Conversely, the TVL on the BNB Smart Chain experienced minimal changes, while TRX deposits on the Tron network declined by 12%. Moreover, the Ethereum network’s market share in decentralised exchanges (DEX) dramatically dropped from 75.5% to 22.3% between March 5 and May 21, with the BNB Smart Chain becoming the primary beneficiary.
Interactions with decentralised applications (DApps) have also decreased, as the top 12 DApps on the Ethereum network witnessed an 11% drop in active addresses over the last 30 days. This decline may reflect dissatisfaction among investors due to high transaction costs. Additionally, Ether futures contracts have seen limited leveraged buying demand, with sellers requesting higher premiums to delay settlement.
These indicators suggest a bearish sentiment, including the decreasing DEX market share, declining DApp addresses, and lack of leveraged buying interest. There is currently no immediate catalyst to support a sustained rally above $1,920 in the short term, despite expectations surrounding Vitalik Buterin’s appearance at Edcon 2023 in Montenegro.
