News Report:
On Thursday, October 24th, Ethereum unexpectedly dropped below $2,500 and then rebounded. The price of Ethereum has been steadily declining from $2,700. Doubts about the fundamentals of Ethereum are increasing, and although it has followed the overall cryptocurrency market in the short term, the market believes that its long-term price weakness is driven by specific factors of its blockchain network.
CoinTelegraph pointed out that the chance of Ethereum reclaiming the $2,800 support level is diminishing. On-chain data shows that high transaction fees are pushing activity away from the Ethereum network, ultimately reducing the demand for native staking.
One reason for the recent decline in Ethereum can be attributed to the 5% decrease in total cryptocurrency market capitalization within two days until October 23rd. However, the overall index has still risen by 1.9% in the past 30 days, indicating that Ethereum’s performance has lagged behind the market by 8% during this period. This poor performance helps explain why Ethereum investors lack optimism.
Although the average transaction fee on Ethereum in the past two weeks has been $4, which may indicate strong on-chain activity, it also enhances the attractiveness of competing blockchains that offer low-cost services.
This issue is not so important for large investors or whales participating in arbitrage, but it severely limits some smaller use cases.
According to DefiLlama data, Solana, a major competitor to Ethereum in the United States, has achieved a trading volume of $13.4 billion in the past 7 days, which is 67% higher than Ethereum’s trading volume during the same period.
This gap has significantly widened as the trading volume of these two networks was comparable before October.
Moreover, despite the strong overall momentum, decentralized exchange (DEX) trading volume on Ethereum has decreased by 13% in the 7-day period until Wednesday. During this period, both Uniswap and Curve Finance experienced an 18% decline in Ethereum network activity.
In contrast, Raydium’s trading volume on Solana has grown by 42%, and Lifinity’s trading volume has surged by 77% compared to the previous week.
In terms of Total Value Locked (TVL), Ethereum’s performance has disappointed investors, with TVL reaching 18.2 million ETH, a 5% decrease from a month ago.
A decrease in the number of deposits is generally seen as having a negative impact on the supply and demand dynamics of Ethereum, and this is particularly important when validators withdraw Ethereum from staking, which is currently happening. According to Staking Rewards data, the staked amount on the Ethereum network has decreased by a net of 191,000 ETH in the 30-day period until October 23rd, with a value of $492 million at the current price.
From an on-chain perspective, Ethereum is lagging behind competing networks. Solana’s TVL has grown by 12% in SOL, while deposits on the Binance Chain have remained stable in the past 30 days.
Additionally, another factor that has disappointed investors in Ethereum’s price outlook is the uncertainty surrounding the upcoming Prague-Electra upgrade.
Originally scheduled for the first quarter of 2025, this upgrade focuses on improving scalability, including the introduction of Verkle trees to reduce node storage and EIP-7251 to improve validator efficiency. However, concerns remain about potential delays and whether these changes will adequately address network congestion issues, which are still key factors for Ethereum’s long-term growth prospects.
