By Cointelegraph.com News
Ether (ETH) has been unable to close above $2,500 since Sept. 2, underperforming the broader altcoin market by 4% over the past eight days. Some analysts attribute this to outflows from the recently launched spot Ether exchange-traded funds (ETFs), while others point to declining interest in decentralized applications, airdrops, and memecoins.
External factors have also played a role in Ether’s price weakness, including regulatory uncertainty heightened by the upcoming US presidential election in November.
Dampened retail investor interest in crypto and regulatory uncertainty dent Ether price
The Google rends search for “buy cryptos” shows an interesting pattern, with a peak coinciding with Ether’s highest price in 2024 at $4,094.
However, after two months of decline, Ether recovered to $3,989 on May 19, just 2.5% below its previous high. Despite this, retail interest had already waned by then. This trend is not exclusive to Ether, but it highlights how quickly traders lose enthusiasm.
This dynamic creates anomalies when analyzing on-chain metrics like total value locked (TVL), as many blockchain projects and venture capital funds capitalized on earlier token launches and price peaks while retail investors lost interest. Such boom-and-bust cycles are typical of industries where traders tend to enter during bull markets, especially when leverage is involved.
Thus, even without major collapses like FTX or Luna this cycle, traders have become apathetic and may need new drivers to reenter the market. Previous bull runs were driven by altcoins, utility tokens, memecoins, NFTs, gaming, metaverse projects, and more recently, Web3 infrastructure and artificial intelligence. While history doesn’t necessarily repeat, it often rhymes.
From a broader perspective, Ethereum faces negative pressure from the regulatory environment. The current U.S. administration has been known for its firm anti-crypto stance, exemplified by legal actions against major exchanges like Coinbase, Binance, and Kraken. Additionally, Ethereum’s top decentralized applications, including Uniswap, Metamask, and OpenSea, have faced scrutiny from the U.S. Securities and Exchange Commission (SEC).
Ethereum on-chain metrics signal low demand for ETH usage
While these regulatory actions may not directly impact the Ethereum network’s core operations, they have a substantial negative influence on investor interest in developing and offering services in the U.S. For instance, many airdrops and project launches exclude North Americans from participating, while investment firms and market makers are increasingly reluctant to engage with intermediaries based in the U.S. As a result, regulatory uncertainty significantly slows down the growth and adoption of the Ethereum ecosystem.
When evaluating Ether’s price drivers, it’s crucial to consider the role that memecoins, token distributions, and airdrops play in fueling demand for ETH. The sharp increase in project launches and trading activity creates a dual incentive for purchasing ETH. Many projects require Ether to interact with DApps and take part in offers, even if the token distribution is free. Additionally, the surge in demand for these token launches often leads to increased gas fees, which must be paid using ETH.
Related: Congressional elections critical for crypto’s future in the US
Ethereum’s overall activity has declined, with DappRadar reporting that active addresses across DApps dropped by 19% compared to the previous month, and the total number of transactions decreased by 34%. Notably, Uniswap’s NFT aggregator saw a 60% decline in active addresses, while the staking platform Etherfi experienced an 80% reduction in users over the past 30 days.
Investor sentiment toward Ethereum has also been dampened by significant outflows from spot Ether ETFs, which totaled $96 million in net outflows during September. Much of the selling pressure originated from Grayscale’s Ethereum Trust ETF (ETHE), primarily due to its higher-than-average fees. At the same time, major firms such as BlackRock, Fidelity, and Ark 21Shares collectively managed to attract only $20 million in inflows, according to Farside Investors’ data.
Ether’s current price stagnation reflects reduced retail interest, lower Ethereum network activity, and decreased demand for airdrops and token launches.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Source: Cointelegraph.com News