Ethereum (ETH) has witnessed a 6.2% price surge between November 3 and November 5, but its ability to break the $1,900 resistance remains uncertain. Despite a prevailing bullish trend, Ethereum’s 17% return over the past month falls short of Bitcoin’s remarkable 27% gain during the same period. There are several key reasons underlying Ethereum’s underperformance compared to other altcoins.
Regulatory Hurdles And Ecosystem Centralization Concerns
Ethereum has been impacted by uncertainty surrounding ConsenSys, a vital player within its ecosystem. Former employees have filed a lawsuit against ConsenSys and its co-founder, Joseph Lubin. Over two dozen shareholders of ConsenSys AG allege that Lubin, a co-founder of Ethereum, violated a “no-dilution promise” made in 2015. ConsenSys plays a crucial role in developing infrastructure projects essential to the Ethereum network. A Swiss court ruling in favour of the plaintiffs has further compounded the uncertainty.
Additionally, regulatory challenges have hindered the Ethereum ecosystem’s growth. Concerns have arisen around PayPal’s U.S. dollar-pegged stablecoin, PYUSD, operating on the Ethereum network. On November 2, PayPal disclosed a subpoena from the United States Securities and Exchange Commission related to this token.
Criticism has also arisen regarding the decentralization of financial applications on the Ethereum network. Chainlink, a popular Oracle service, reduced the number of participants in its multi-signature wallet from four out of nine to four out of eight. This shift has raised concerns about governance by regular users.
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Gas Fees And Reduced Activity
Ethereum is grappling with high gas fees associated with transactions, including those involving smart contracts. The recent seven-day average transaction fee stood at $4.90, negatively affecting the use of decentralized applications (DApps). Notably, total deposits on the Ethereum network, measured in Ether, have declined to their lowest levels since August 2020.
DefiLlama data reveals that Ethereum DApps saw a total value locked (TVL) of 12.7 million ETH on November 5, down 4% from two months earlier. In contrast, the Tron network experienced a 13% increase in TVL during the same period, while Arbitrum deposits remained at 1 million ETH. Data on DApp activity on the Ethereum network supports the idea of reduced activity.
On-Chain Activity And Exchange Deposits
Even without accounting for the significant 60% decline in the Uniswap NFT Aggregator, the average number of active addresses in the top Ethereum network DApps decreased by 3% compared to the previous month. In contrast, Solana’s top applications saw an average 18% increase in active users during the same period, according to DappRadar data.
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On-chain activity indicates a higher rate of ETH deposits at exchanges. While this doesn’t necessarily imply short-term selling, the availability of coins is often viewed as a precautionary measure by analysts. The present daily ETH deposit average of 255,614 represents a 30% increase from two weeks earlier, suggesting that holders are more inclined to sell as Ether’s price approaches $1,900.
In summary, Ethereum’s challenges related to regulatory hurdles, ecosystem centralization concerns, high gas fees, and reduced on-chain activity have contributed to its underperformance compared to other altcoins. Breaking the $1,900 resistance may prove to be a tougher task than initially anticipated, warranting caution for Ethereum investors.
Disclaimer: This article provides information for news and informational purposes only and should not be considered as financial or investment advice. Cryptocurrency investments involve risk, and individuals should conduct their own research and seek professional advice as needed.