Ethereum (ETH) price surged 6.2% between November 3 and 5, but the altcoin struggled to break above the $1,900 resistance level. Despite the current bullish trend, Ethereum’s 17% return over the past 30 days is still lower than Bitcoin’s (BTC) impressive 27% gain over the same period.
Regulatory hurdles and criticism of ecosystem centralization linger
Analysts attributed part of Ethereum’s underperformance to uncertainty around Consensys, a key player in the Ethereum ecosystem. Former employees filed a lawsuit against the company and its co-founder, Joseph Lubin. Two dozen shareholders of Consensys AG, a Swiss-based holding company, claim that Lubin, an Ethereum co-founder, violated a “non-dilution pledge” made in 2015.
Consensys develops and hosts infrastructure projects critical to the Ethereum network. It was founded in October 2014, approximately nine months before the launch of the Ethereum blockchain in mid-2015. Furthermore, the High Court of Justice in Zug, Switzerland, ruled in favor of the plaintiffs, adding to the current uncertainty.
Regulatory challenges have hindered the growth of the Ethereum ecosystem. The latest concerns center on PayPal’s U.S. dollar-pegged stablecoin PYUSD, which runs on the Ethereum network. The token is designed for digital payments and Web3 applications. On November 2, PayPal disclosed a subpoena it received from the U.S. Securities and Exchange Commission (SEC).
In addition to regulatory pressure, there has also been significant criticism of the decentralization of financial applications (DeFi) within the Ethereum network. Chainlink, the preferred solution for oracle services, quietly reduced the number of participants in its multisig wallet from 4 out of 9 to 4 out of 8. Analysts highlighted the lack of governance among general users as a major issue.
Ethereum’s underperformance against altcoins is evidence of other problems
Several major altcoins, including Solana (SOL), XRP, and Cardano (ADA), have outperformed Ethereum, with returns of 75.5%, 37%, and 35% respectively over the past 30 days. This discrepancy suggests that factors hindering ETH’s development are not just related to regulatory pressure or reduced demand in the DeFi and NFT markets.
A pressing issue facing the Ethereum network is the high gas fees associated with transactions, including those executed by smart contracts. The latest seven-day average transaction fee is $4.90, negatively impacting decentralized application (DApp) usage.
Additionally, total deposits (in ether) on the Ethereum network have fallen to their lowest levels since August 2020. It’s worth noting that this analysis does not take into account the impact of native Ethereum staking.
According to DefiLlama data, on November 5, the total locked value (TVL) of Ethereum DApps was 12.7 million ETH, a 4% decrease from 13.2 million ETH two months ago. In comparison, TVL on the Tron network grew by 13% during the same period, while Arbitrum deposits remained at 1 million ETH. Data on DApp activity on the Ethereum network supports the concept of declining activity.
Even excluding the impact of the Uniswap NFT aggregator’s massive 60% drop, the average number of active addresses for the Ethereum network’s top DApps fell by 3% from the previous month. By comparison, active users of Solana’s popular apps grew an average of 18% during the same period, according to DappRadar.
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Finally, on-chain activity shows an increase in users depositing ETH on exchanges. While these data don’t necessarily mean a short-term sell-off, analysts generally view the coin’s availability as a precautionary measure.
The current average daily deposits of ETH are 255,614 pieces, an increase of 30% from two weeks ago, which shows that when the price of ETH is close to $1,900, holders are more inclined to sell.
Data suggests that reduced TVL, declining DApp activity, and rising ETH exchange deposit rates are negatively impacting the likelihood of ETH breaking through the $1,900 resistance level. Price levels may be more challenging than initially expected, and for now, Ethereum bears can take a breather.
This article is for general information purposes only and is not intended to be, and should not be construed as, legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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