Source: Cointelegraph Original: "{title}"
The price of Ethereum fell below $2,200 on March 9 and has failed to recover since then. Since March, the cryptocurrency has dropped 14%, which has negatively impacted investor sentiment, especially considering that the overall cryptocurrency market has only declined by 4% during the same period.
As sentiment turns pessimistic, traders are also concerned that Ethereum's price may further retrace as activity on decentralized exchanges (DEX) on the Ethereum network has seen a 34% weekly decline.
Ranking of blockchain by 7-day DEX trading volume (in USD). Source: DefiLlama
In the past seven days, DEX trading volume on Ethereum has decreased by 34%, a trend that has also affected its L2 solutions such as Base, Arbitrum, and Polygon. The market downturn has also impacted some of Ethereum's competitors, with Solana's DEX trading volume down 29% and SUI's volume down 17%. On the other hand, BNB Chain's trading volume increased by 27%, while Canto's volume surged by 445%.
The negative trading volume trend for Ethereum is also reflected in the 85% drop in trading volume for Maverick Protocol compared to the previous week, and a 46% decline for DODO. Notably, the largest DEX on BNB Chain, PancakeSwap, has surpassed Uniswap in fees. Although Ethereum remains the leader in DEX trading volume, the decline in fees is weakening demand for Ethereum.
Ranking of top protocols by 7-day fees (in USD). Source: DefiLlama
PancakeSwap operates solely on BNB Chain and generated $22.3 million in fees over the past seven days, surpassing Uniswap, which operates on Ethereum, Base, Arbitrum, Polygon, and Optimism. Other signs of weak Ethereum fees include Lido's fees lagging behind Solana's Jupiter, and the fees generated by the major Ethereum-based lending protocol AAVE being lower than those of the Solana-based automated market maker and liquidity provider Meteora.
On a positive note, Ethereum still dominates in total value locked (TVL) with $47.2 billion, although it has decreased by 9% week-over-week, significantly narrowing the gap with competitors. Additionally, its L2 ecosystem has shown increasing signs of weakness in the seven days ending March 18.
Ranking of top blockchains by TVL (in USD). Source: DefiLlama
Solana's TVL decreased by 3%, while BNB Chain's TVL grew by 6% compared to the previous week. The negative performance of Ethereum's TVL includes an 11% drop for Stargate Finance, a 9% decline for Maker, and a 6% decrease for Spark.
The weakness in Ethereum's on-chain metrics aligns with a reduction in demand for leveraged long positions in Ethereum futures, with the premium over the spot market falling below the 5% neutral threshold, indicating a weakening of trader confidence.
Annualized premium of Ethereum 2-month futures. Source: laevitas.ch
Currently, the annualized premium for Ethereum futures is 3%, the lowest level in the past year, highlighting weak demand from bullish traders. Meanwhile, since March 5, Ethereum spot exchange-traded funds (ETFs) have recorded a net outflow of $293 million, indicating a decline in institutional interest.
Ethereum is facing increasing competition in the memecoin space from Solana, especially following the launch of the official Trump token, TRUMP. At the same time, Tron and Solana have attracted a total of $75 billion in stablecoin inflows due to lower fees. Additionally, Hyperliquid perpetual futures has launched its own blockchain, further challenging Ethereum's market position.
These changes come as investors and developers are engaged in a heated debate over whether Ethereum's L2 solutions have gained excessive benefits from extremely low Rollup fees. Essentially, the decline in DEX market share reflects a decrease in institutional interest, especially given that Ethereum's native staking yield, after inflation adjustment, is only 2.3%.
For Ethereum to regain its growth momentum, it must demonstrate a clear competitive advantage. The upcoming "Pectra" upgrade needs to provide a viable path for sustainable user growth; otherwise, Ethereum's chances of surpassing its competitors remain slim.
This article is for informational purposes only and does not constitute legal or investment advice. The views, thoughts, and opinions expressed in this article are solely those of the author and do not necessarily reflect or represent the views of Cointelegraph.
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