Ether (ETH) price has experienced a significant 7% decline between October 6 and October 12, hitting a seven-month low at $1,520. While there was a slight rebound to $1,550 on October 13, it is evident that investor confidence and interest in Ethereum are waning, as indicated by multiple metrics. This decline does not bode well for the overall altcoin market, as Ethereum has underperformed by 15% since July.
Several key factors have contributed to this downward trend in Ether’s price. Firstly, Ethereum’s transaction fees have hit a 12-month low, decreasing to $1.80 on average for a 7-day period. Just two months ago, these fees were over $4.70, indicating a significant drop. This decline aligns with the rise of layer-2 solutions and the reduced need for expensive transactions.
Another significant event that impacted Ether’s price was the remarks made by Cardano founder Charles Hoskinson regarding William Hinman’s classification of Ether as a non-security asset in 2018. Hoskinson, who is also an Ethereum co-founder, alleged that some form of “favoritism” played a role in the regulator’s decision. The uncertainty surrounding Ethereum’s classification adds to the negative sentiment in the market.
Additionally, Ethereum staking has seen less interest from investors, with the yield decreasing from 4.3% to 3.6% in just two months. This decrease, coupled with an increase in ETH supply due to reduced activity in the burn mechanism, has reversed the previous trend of scarcity. These factors contribute to diminishing confidence in the network’s validation process.
On October 12, regulatory concerns escalated after the Autorité de Contrôle Prudentiel et de Résolution (ACPR) highlighted the “paradoxical high degree of concentration” risk in decentralized finance (DeFi). The report suggests that specific rules governing smart contract certification and governance are necessary to protect users. These concerns weigh heavily on the DeFi industry and may adversely affect investor confidence in Ethereum.
Taking a closer look at derivatives metrics provides insight into how professional Ether traders are positioning themselves following the price correction. The premium for Ether futures reached its lowest point in five months on October 12, signaling a lack of demand for leveraged long positions. Not even an 8.5% Ether price rally between September 27 and October 1 could push ETH futures above the 5% neutral threshold. This lack of demand for leveraged positions indicates a decreased appetite for risk and a lack of confidence in the market.
Ethereum’s total value locked (TVL) has decreased from 13.3 million ETH to 12.5 million ETH in the past two months, indicating reduced demand. This decline reflects diminishing confidence in the DeFi industry and the lower advantages it offers compared to traditional finance in U.S. dollars.
To understand the significance of this decline in TVL, it is important to analyze metrics related to decentralized application (DApp) usage. Unfortunately, Ethereum has experienced decreasing activity in most ecosystem DApps, including leading DEX Uniswap and the largest NFT marketplace, OpenSea. The reduced demand is also evident in the gaming sector, with Stargate showing only 6,180 active accounts on the network. These declining metrics raise concerns about the sustainability and adoption of Ethereum-based DApps.
Considering the reduced demand for leveraged long positions, declining staking yields, regulatory uncertainties, and a broader lack of interest, the likelihood of Ether dropping below $1,500 remains relatively high. The decline in investor confidence and the negative market metrics paint a gloomy picture for Ethereum’s future. It is crucial for the Ethereum community to address these challenges and find innovative solutions to attract investors and revive interest in the network. Only by overcoming these obstacles can Ethereum regain its position as a leading force in the cryptocurrency market.