Ethereum DApps Increase 36% in One Week, Will ETH Price Rise Following suit?

Author: Marcel Pechman, CoinTelegraph; Compiler: Deng Tong, Golden Finance

Since falling to $2,396 on August 27, ETH has risen 7.5%, but the 22% drop in the past 30 days shows that investors are still uneasy about their positions. Although Ethereum's network activity is increasing, the price of Ethereum has not yet shown signs of recovering the $3,800 level of early June.

Ethereum ETF spot demand is weak in part to explain ETH's weakness

Given that the market value of altcoins has fallen by 13% in the past 30 days, which means that Ethereum has not performed as well as its peers, this situation is even more worrying. This trend is partly attributed to the over-expectation of the launch of a spot exchange-traded fund (ETF) in the United States on July 24. There is more to the story, however, as Ether was most recently trading at $3,200 on April 24.

Ethereum bulls are pinning their hopes on the recent drop in average Ethereum transaction fees, which fell below $1 for the first time in four years. Coupled with the successful reliance on Layer 2 solutions for projects that require higher throughput, Ethereum’s dominance in decentralized applications (DApps) remains unchallenged.

Decentralized Exchange 7-Day Volume, USD. Source: DefiLlama

Ethereum bears argue that competing chains offer lower fees on the base layer, providing a simpler user experience for newcomers.In reality, most users aren’t concerned about higher centralization on Tron or BNB Chain or the prohibitive costs of running a Solana validator. The success of Ethereum’s own layer 2 solution, Base, suggests that users value direct access to Coinbase over self-sovereignty.

Ethereum Network TVL and Transaction Volume Rising

Whether or not Ether’s price is benefiting from its layer 2 ecosystem, the total value locked (TVL) on the Ethereum network has been rising. According to DefiLlama, total deposits in Ethereum DApps increased to 18.9 million ETH, up 4% from two weeks ago.In contrast, Tron’s TVL fell 10% in TRX terms over the same period, while deposits on Avalanche fell 4%.

Symbiotic, a recently launched staking project on the Ethereum network, showed the most significant TVL growth over the past two weeks, up 83% to 640,310 ETH. Similarly, total deposits on Ether.fi’s Liquid Staking Protocol grew 15%. However, claiming that Ethereum’s network activity has grown simply by analyzing its TVL is misleading, as most DApps do not require a large deposit base.

In terms of network activity, Ethereum’s DApp volume grew 36% between July 22 and July 29, driven primarily by decentralized exchange Uniswap, which saw a 35% increase in volume to $30.8 billion, and automated market maker Balancer, which saw a 46% increase in volume to $18.1 billion, according to DappRadar. In contrast, DApp volume on the Solana network stagnated at around $6.3 billion per week.

Top Ethereum DApps by 7-day transaction volume, USD. Source: DappRadar

Active addresses and transactions down

However, not all aspects of Ethereum network activity have been positive since August 22. For example, the number of active addresses interacting with DApps remained the same, while the total number of transactions fell by 8%. In contrast, BNB Chain saw a 7% increase in active addresses, while Solana saw a 10% increase in users over the same period.

Ethereum’s performance was also dragged down by lackluster inflows into spot Ethereum ETF funds, which saw net outflows of $107 million over the past two weeks, according to data from Farside Investors. The data highlights a lack of interest from institutional investors despite strong momentum for similar Bitcoin spot ETF instruments, which saw net inflows of $523 million over the same period.

Ultimately, there are no clear signs of excitement within the Ethereum network to justify a significant price increase for Ethereum. Critics may argue that Ethereum’s average transaction fee dropping below $1 isn’t enough, especially given that competitors like BNB Chain and Solana offer much lower costs. Finally, the data suggests that Ethereum’s price is not directly correlated to on-chain activity.