Ether (ETH) has experienced a surge of 6.2% between November 3 and November 5. However, despite this bullish trend, the altcoin fails to break the resistance at $1,900. In comparison to Bitcoin (BTC), Ether’s 17% return over the last 30 days falls short of Bitcoin’s impressive 27% gain during the same period.
Uncertainty Surrounding Consensys
Analysts attribute some of Ether’s underperformance to uncertainty surrounding Consensys, a key player in the Ethereum ecosystem. Former employees have filed a lawsuit against the company and its co-founder, Joseph Lubin. Over two dozen shareholders of Consensys AG claim that Lubin violated a “no-dilution promise” made in 2015.
Consensys, responsible for developing and hosting infrastructure projects crucial to the Ethereum network, has faced further setbacks as the High Court of Zug in Switzerland ruled in favor of the plaintiffs, exacerbating the current uncertainty.
Regulatory challenges have hampered the growth of the Ethereum ecosystem. The latest concern revolves around PayPal’s U.S. dollar-pegged stablecoin, PYUSD, operating on the Ethereum network. PayPal disclosed a subpoena it received from the U.S. Securities and Exchange Commission (SEC) on November 2.
Furthermore, there has been notable criticism of the decentralization of financial applications (DeFi) within the Ethereum network. Chainlink, a preferred solution for oracle services, quietly reduced the number of participants in its multi-signature wallet from 4-out-of-9 to 4-out-of-8. This lack of governance by regular users poses a significant issue.
Several major altcoins, including Solana (SOL), XRP, and Cardano (ADA), have outperformed Ether in the last 30 days. Solana boasts a return of 75.5%, while XRP and Cardano have returns of 37% and 35%, respectively. This discrepancy indicates that the factors holding back Ether are not solely related to regulatory pressure or reduced demand for DeFi and NFT markets.
High Gas Fees and Reduced Activity
One of the pressing issues for the Ethereum network is the high gas fees associated with transactions, including smart contracts. The average transaction fee in the last 7 days was $4.90, negatively impacting the usage of decentralized applications (DApps).
In addition, total deposits on the Ethereum network, measured in Ether, have dropped to their lowest levels since August 2020. Despite the effects of native Ethereum staking, Ethereum DApps’ total value locked (TVL) decreased by 4% from two months earlier.
Further supporting the notion of reduced activity, data reveals a decrease in the average number of active addresses across the top Ethereum network DApps. In contrast, Solana’s top applications witnessed an average 18% increase in active users during the same period, according to DappRadar data.
Increased Exchange Deposits
On-chain activity suggests a rise in user deposits of ETH at exchanges. While this data does not necessarily signal short-term selling, the availability of coins is typically viewed as a precautionary measure by analysts.
The current daily ETH deposit average of 255,614 represents a 30% increase from two weeks earlier, indicating that holders are more inclined to sell as Ether’s price approaches $1,900. These reduced TVL, declining DApps activity, and a higher rate of ETH exchange deposits are negatively impacting the likelihood of Ether breaking the $1,900 resistance.
Despite the surge in price, Ether faces challenges in breaking the resistance at $1,900. The various factors discussed – underperformance, uncertainty, regulatory challenges, reduced activity, and increased exchange deposits – contribute to the difficulty Ether encounters.
For now, Ether bears can take a breath as the price level proves to be more challenging than initially expected. It remains to be seen how Ether can overcome these hurdles and regain its momentum in the market.
Ether faces an uphill battle as it confronts various challenges that hinder its growth and performance. To maintain its position as a leading cryptocurrency, Ethereum and its ecosystem need to address regulatory concerns, improve scalability, reduce gas fees, and promote greater decentralization. Only by proactively tackling these obstacles can Ether pave the way for future success.