3 Reasons Why Ethereum Price is Lagging Behind Other Altcoins
The price of Ether (ETH) experienced a 6.2% surge from November 3 to November 5. However, the altcoin is struggling to break the $1,900 resistance level. Despite the current bullish trend, Ethereum’s return of 17% over the past 30 days falls short of Bitcoin’s impressive 27% gain during the same period.
Obstacles in Regulation and Centralization Criticism
Analysts believe that some of Ethereum’s underperformance can be attributed 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, alleging a violation of a “no-dilution promise” made in 2015.
Consensys is responsible for developing and hosting infrastructure projects crucial to the Ethereum network. The recent ruling by the High Court of Zug in Switzerland in favor of the plaintiffs has further added to the current uncertainty.
Regulatory challenges have also hampered the growth of the Ethereum ecosystem. Concerns have arisen surrounding PayPal’s U.S. dollar-pegged stablecoin, PYUSD, which operates on the Ethereum network. PayPal disclosed a subpoena it received from the United States Securities and Exchange Commission on November 2.
In addition to regulatory pressures, there has been criticism regarding the decentralization of financial applications within the Ethereum network. Chainlink, a preferred solution for oracle services, quietly reduced the number of participants in its multisignature wallet. Analysts have highlighted the lack of governance by regular users as a significant issue.
Ethereum’s Underperformance and Other Concerns
Several major altcoins, including Solana’s SOL, XRP, and Cardano’s ADA, have outperformed Ethereum in the past 30 days. This suggests that the factors holding back ETH are not solely related to regulatory pressure or reduced demand for decentralized finance and non-fungible token markets.
One of the pressing issues for the Ethereum network is the high gas fees associated with transactions, including those executed by smart contracts. The latest seven-day average transaction fee was $4.90, negatively impacting the usage of decentralized applications (DApps).
In addition, the total deposits on the Ethereum network have dropped to their lowest levels since August 2020. It is important to note that this analysis does not consider the effects of native Ethereum staking.
Data from DefiLlama reveals that Ethereum DApps had a total value locked (TVL) of 12.7 million ETH on November 5, down 4% from two months earlier. In comparison, the TVL on the Tron network increased by 13% during the same period, while Arbitrum deposits remained at 1 million ETH. Data on DApp activity on the Ethereum network also supports the notion of reduced activity.
Even excluding the significant decline in the Uniswap NFT Aggregator, the average number of active addresses across 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.
On-chain activity indicates increased user deposits of ETH at exchanges. While this data does not necessarily indicate short-term selling, the mere availability of coins is typically 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.
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. The price level may prove more challenging than initially expected, and for now, Ether bears can take a breath.
Please note that this article is for general information purposes and should not be considered as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of the website.