The price of Ether (ETH) dropped below $2,200 on March 9 and has faced challenges in bouncing back since then. Currently, the altcoin has decreased by 14% in March, which has negatively impacted investor sentiment, especially considering the broader crypto market experienced only a 4% decrease during the same timeframe.
Additionally, traders are expressing concerns over potential further declines in ETH’s price following a notable 34% weekly fall in decentralized exchange (DEX) activity on the Ethereum network.
Blockchains ranked by 7-day DEX volumes, USD.
In the past week, DEX volumes on Ethereum have plummeted by 34%, impacting its layer-2 solutions like Base, Arbitrum, and Polygon as well. The downturn has also affected Ethereum’s rivals; for instance, Solana’s DEX activity decreased by 29%, while SUI’s dropped by 17%. On a more positive note, BNB Chain experienced a 27% weekly volume increase, and Canto saw an impressive surge of 445%.
Ethereum’s declining volume trends reflect an 85% fall for Maverick Protocol and a 46% decrease for DODO compared to the previous week. Significantly, fees on PancakeSwap—the leading DEX on BNB Chain—outpaced those on Uniswap. Although Ethereum still leads in DEX volumes, declining fees are impacting ETH demand.
Top protocols ranked by 7-day fees, USD.
PancakeSwap, which operates solely on BNB Chain, has generated $22.3 million in fees over the last week, surpassing Uniswap, which operates across Ethereum, Base, Arbitrum, Polygon, and Optimism. Additional signals of Ethereum’s fee weakness include Lido falling behind Solana’s Jupiter and AAVE, which has generated lower fees than Meteora, a Solana-based liquidity provider and automated market maker.
Ethereum leads in total value locked, but the gap is narrowing
On a positive note, Ethereum maintains its position as the leader in total value locked (TVL) at $47.2 billion; however, a 9% weekly decline has sharply narrowed the margin with competitors. Furthermore, its layer-2 ecosystem has displayed increasing signs of weakness during the week leading up to March 18.
Top blockchains ranked by total value locked, USD.
Solana’s TVL fell by 3%, while BNB Chain experienced a 6% rise in deposits compared to the previous week. Negative factors for Ethereum’s TVL include an 11% fall in Stargate Finance over seven days, a 9% decrease in Maker deposits, and a 6% decline in Spark deposits.
Ethereum’s weakening on-chain metrics correlate with reduced demand for leveraged longs in ETH futures, as their premium over spot markets slipped below the 5% neutral threshold, indicating a decrease in trader confidence.
Ether 2-month futures annualized premium.
The current 3% annualized ETH futures premium is the lowest it has been in over a year, underscoring weak appetite from bullish traders. Moreover, spot Ethereum exchange-traded funds (ETFs) have seen $293 million in net outflows since March 5, pointing to a decline in institutional interest.
After the recent upgrade, ETH needs a competitive edge for sustainable adoption
Ethereum is facing increasing competition from Solana in the memecoin arena, particularly following the launch of the Official Trump (TRUMP) token. Concurrently, Tron and Solana have amassed a combined total of $75 billion in stablecoins, leveraging their lower transaction costs. Furthermore, Hyperliquid perpetual futures has unveiled its own blockchain, adding further pressure on Ethereum’s market position.
Amidst this, there are ongoing discussions among investors and developers regarding whether Ethereum’s layer-2 solutions are unduly benefiting from extremely low rollup fees. The decline in DEX market share suggests diminishing institutional interest, particularly as Ethereum’s native staking yield stands at just 2.3% when adjusted for inflation-driven supply growth.
For Ether to regain its momentum, it must establish a distinct competitive advantage. The anticipated ‘Pectra’ upgrade must offer a feasible pathway for sustainable user adoption; otherwise, ETH may continue to struggle against its competitors.
This article is for general informational purposes and is not intended to be considered legal or investment advice. The views, thoughts, and opinions expressed are solely those of the author and do not necessarily reflect the views or opinions of any organization.