The number of Ethereum DApps dropped 33% in a week. Will ETH weaken further?

Author: Marcel Pechman, CoinTelegraph; Compiler: Tao Zhu, Golden Finance

Since August 9, ETH has been trading in a narrow range of $2,300, maintaining solid support at $2,550. However, this is down 20% from three weeks ago, when ETH closed July above $3,300. The drop comes after a general drop in cryptocurrency prices, but Ether faces its own particular challenges. The Ethereum network's decentralized applications (DApps) have seen a significant drop in activity over the past seven days.

Spot Ethereum ETF Flows and Weak Ethereum Network Activity Limit ETH Price Upside

Part of Ethereum’s failure to maintain bullish momentum can be attributed to the poor performance of spot Ethereum exchange-traded funds (ETFs). According to data from Farside Investors, recently launched ETFs have experienced a total of $30 million in net outflows since August 9. Despite these outflows, traders remain optimistic that inflows from major players such as BlackRock and Fidelity will offset outflows from Grayscale’s ETHE, although this remains to be seen.

Despite charging significantly higher fees than its competitors, the Ethereum network maintains its lead in total value locked (TVL) and trading volume. This fee disparity presents challenges as the user experience on Ethereum does not favor second-layer solutions, creating opportunities for niche players to gain traction on alternative networks such as Solana, BNB Chain, and TON. In fact, according to DappRadar, none of the top 12 DApps by number of users are based on Ethereum.

Top DApps by 7-day active addresses. Source: DappRadar

Ethereum’s top-performing DApp, Uniswap, reported 114,180 active addresses over the past week. In comparison, Pump.fun on Solana attracted 225,110 active addresses over the same period, while Move Stake on BNB Chain attracted 213,010.This comparison does not take into account the highly successful Ethereum layer 2 ecosystem, which includes solutions such as Base, Optimism, and Arbitrum. These layer 2 solutions reached an all-time high in activity on August 17, peaking at 348 transactions per second, according to L2Beat.

Ethereum TVL Increases, But On-Chain Transactions Decline

There’s no doubt that users value Ethereum’s network security because it allows for final settlement, but as transactions aggregate, this strategy leads to a decline in demand for ETH.Therefore, despite the continued growth and development of the Ethereum Layer 2 ecosystem, a decline in Ethereum’s base layer activity could have a negative impact on ETH prices.DappRadar data shows that Ethereum network activity has dropped significantly over the past week, giving investors ample reason to worry.

Top blockchains by 7-day DApss transaction volume. Source: DappRadar

Ethereum’s 7-day transaction volume fell sharply by 33% to $39.04 billion. The same trend was seen across its competitors: BNB Chain saw a 26% decrease in volume, Solana saw a 23% decrease, and TON saw a 46% drop in volume over the same period. This general drop in volume suggests a general decline in interest across the industry, rather than an issue specific to the Ethereum network. On a positive note, Ethereum’s total value locked (TVL) grew 9% in 30 days, reaching 18.6 million ETH on August 18, according to data from DefiLlama. In contrast, BNB Chain’s BNB deposits fell 3%, and Tron’s TRX TVL fell 7% over the same period. This difference reflects investors’ medium-term confidence in Ethereum’s price. Ethereum network TVL, ETH. Source: DefiLlama Highlights on the Ethereum network included Symbiotic, a restaking solution with $1.58 billion in deposits, and Magpie Ecosystem, a decentralized finance and yield platform with over $1.37 billion in deposits. While the general decline in cryptocurrency interest, as evidenced by falling prices and on-chain metrics, suggests Ethereum may face a longer road to recovery to $3,300, the decline in the number of DApps is not a cause for immediate concern.