Tuesday, July 23, 2024
Crypto

3 reasons why Ethereum price is underperforming altcoins

The Ethereum price has been underperforming compared to other altcoins for several reasons. One major factor is the uncertainty surrounding Consensys, a key player in the Ethereum ecosystem, as former employees have filed a lawsuit against the company and its co-founder, Joseph Lubin. Additionally, regulatory challenges, such as the recent subpoena received by PayPal from the U.S. Securities and Exchange Commission, have hindered the growth of the Ethereum network. Another issue is the high gas fees associated with transactions on the Ethereum network, which have negatively impacted the usage of decentralized applications. These factors, along with reduced activity in Ethereum DApps and increased user deposits of ETH at exchanges, have made it more challenging for Ethereum to break the $1,900 resistance level.

3 reasons why Ethereum price is underperforming altcoins

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Regulatory Hurdles and Ecosystem Centralization Critiques

Uncertainty Surrounding Consensys

One of the reasons for Ethereum’s underperformance compared to altcoins is the uncertainty surrounding Consensys, a key player in the Ethereum ecosystem. Consensys is responsible for developing and hosting infrastructure projects crucial to the Ethereum network. However, the company and its co-founder, Joseph Lubin, are currently facing a lawsuit filed by former employees. Over two dozen shareholders of Consensys AG claim that Lubin violated a “no-dilution promise” made in 2015. This lawsuit has created a cloud of uncertainty around Consensys and its role in the Ethereum ecosystem.

Lawsuit against Consensys and Joseph Lubin

The lawsuit filed against Consensys and Joseph Lubin by former employees has further contributed to the regulatory hurdles and ecosystem centralization critiques faced by Ethereum. The High Court of Zug in Switzerland ruled in favor of the plaintiffs, adding to the uncertainty surrounding Consensys. As a co-founder of Ethereum, Lubin’s involvement in this legal battle raises concerns about the future of the Ethereum ecosystem and its ability to overcome regulatory challenges.

Regulatory Challenges for the Ethereum Ecosystem

In addition to the lawsuit against Consensys, the Ethereum ecosystem has faced various regulatory challenges. One example is the recent subpoena received by PayPal, which operates a U.S. dollar-pegged stablecoin called PYUSD on the Ethereum network. This subpoena from the U.S. Securities and Exchange Commission (SEC) raises questions about the regulatory compliance of stablecoins and their impact on the Ethereum network. These ongoing regulatory challenges have hampered the growth and development of the Ethereum ecosystem, contributing to Ethereum’s underperformance compared to altcoins.

3 reasons why Ethereum price is underperforming altcoins

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Underperformance Compared to Altcoins

Solana, XRP, and Cardano Outperforming Ether

One of the key factors contributing to Ethereum’s underperformance compared to altcoins is the strong performance of coins like Solana (SOL), XRP, and Cardano (ADA). These altcoins have seen significant returns in the last 30 days, with Solana up 75.5%, XRP up 37%, and Cardano up 35%. This discrepancy in performance suggests that there are additional factors weighing down Ethereum’s price and hindering its growth compared to other altcoins.

Factors Holding Back ETH

There are several factors that may be holding back Ethereum’s performance. One prominent issue is the high gas fees and transaction costs associated with the Ethereum network. The average transaction fee for Ethereum currently stands at $4.90, which negatively impacts the usability of decentralized applications (DApps) built on the Ethereum blockchain. These high fees make it less attractive for users to interact with Ethereum-based DApps and contribute to the overall decrease in activity within the Ethereum ecosystem.

Another factor contributing to Ethereum’s underperformance is the decreased total deposits on the Ethereum network. The total value locked (TVL) in Ethereum DApps has dropped by 4% in the last two months, while other networks like Tron have seen a 13% increase in TVL. This decrease in total deposits suggests that there may be reduced demand for Ethereum-based applications and tokens, further hindering Ethereum’s growth and adoption.

High Gas Fees and Transaction Costs

One of the primary reasons behind Ethereum’s underperformance compared to altcoins is the high gas fees and transaction costs associated with the network. These fees make it costly for users to interact with decentralized applications (DApps) and execute transactions on the Ethereum blockchain. The current average transaction fee on Ethereum is $4.90, which is considerably higher than many other blockchain networks.

These high fees impact the user experience and limit the usability of Ethereum-based DApps. Users may be deterred from using DApps or executing transactions due to the high costs involved. This has a direct impact on the overall activity and adoption of Ethereum, as users seek out alternative blockchain networks with lower fees.

Decreased Total Deposits on the Ethereum Network

Another factor contributing to Ethereum’s underperformance is the decreased total deposits on the network. The total value locked (TVL) in Ethereum DApps has dropped by 4% in the past two months. In contrast, other networks like Tron have seen a 13% increase in TVL during the same period.

This decrease in total deposits suggests a potential reduction in demand for Ethereum-based applications and tokens. Investors and users may be shifting their focus to other blockchain networks that offer different features and benefits. The decline in TVL is a significant indicator of reduced activity and interest in the Ethereum ecosystem, which can ultimately impact Ethereum’s performance in the market.

Reduced Activity in Ethereum DApps

The reduced total deposits on the Ethereum network align with the reduced activity in Ethereum decentralized applications (DApps). Even when excluding the significant 60% 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. This decrease indicates a decline in user engagement and usage of Ethereum DApps.

In contrast, other blockchain networks like Solana have seen an average 18% increase in active users across their top applications. This divergence in activity highlights the shifting preferences of users towards alternative blockchain platforms that offer lower fees, faster transaction speeds, and different features. The reduced activity in Ethereum DApps can be attributed to the high fees, scalability challenges, and growing competition in the blockchain ecosystem.

3 reasons why Ethereum price is underperforming altcoins

This image is property of s3.cointelegraph.com.

On-Chain Activity and Exchange Deposits

Increased User Deposits of ETH at Exchanges

On-chain activity and exchange deposits provide further insights into Ethereum’s underperformance. There has been an increase in user deposits of ETH at exchanges, which indicates a potential increase in selling pressure. While these deposits don’t necessarily mean that users are selling their ETH immediately, they can serve as a precautionary measure.

The average daily ETH deposits at exchanges have increased by 30% in the past two weeks, reaching a daily average of 255,614 ETH. This suggests that some holders may be more inclined to sell their ETH as the price approaches the $1,900 resistance level. The availability of coins on exchanges may indicate an increased willingness to sell, which can impact Ether’s price resistance.

Potential Impact on Ether’s Price Resistance

The increased exchange deposits and potential selling pressure pose challenges for Ether’s ability to break the $1,900 resistance level. As more users deposit their ETH on exchanges, there is a higher likelihood of selling activities that can prevent Ether from surpassing this significant price barrier. The price resistance at $1,900 may prove to be more challenging than anticipated, given the current market dynamics and increased selling pressure.

The data suggests that reduced total deposits, declining activity in DApps, and increased exchange deposits are all contributing to Ethereum’s underperformance compared to altcoins. These factors highlight the challenges and hurdles that Ethereum faces in its journey towards wider adoption and market dominance. As the cryptocurrency landscape evolves, it will be crucial for Ethereum to address these issues and find solutions that can support its growth and competitiveness in the market.

3 reasons why Ethereum price is underperforming altcoins

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Source: https://cointelegraph.com/news/why-ethereum-price-is-underperforming-altcoins