Ethereum: Does another bumpy ride await the king of altcoins?

Ethereum: Does another bumpy ride await the king of altcoins?

  • Ethereum fees and TVL decreased as Bitcoin dominance continued to squash the possibility of an altcoin season.
  • The NFT market volume, as well as the network growth, dropped.

Although many unfortunate incidents rocked the 2022 crypto market, participants seemed to have survived the fears of repeated capitulation. While the first half of the new year may have offered some respite, there were still signs that the crypto winter was not entirely over.

Read Ethereum’s [ETH] Price Prediction 2023-2024

One cogent reason for this is the position of Ethereum [ETH] and the sectors operating under the blockchain. According to IntoTheBlock, the DeFi and NFT industries have been plagued with lower user engagement and a decrease in trading activity. 

Market patterns hint at another #SlowSummer. For 3 out of the last 4 years, #ETH fees have declined during summer months. Eth on-chain activity dips have also coincided with lower prices. The current trend suggests another season of falling prices, as #DeFi and NFT activity slows

— IntoTheBlock (@intotheblock) June 17, 2023

ETH hasn’t overthrown BTC

Historically, this signals that a crypto summer might not be happening in this cycle. In a quick definition, a crypto summer describes a bullish phase in the cryptocurrency market. Also, this period comes with increased adoption, rising prices of altcoin, and a decrease in Bitcoin’s [BTC] dominance.

For context, Bitcoin dominance refers to the ratio of the king coin’s market cap to the overall crypto market capitalization. At press time, CoinMarketCap revealed that the dominance had increased to 48.11%.

Bitcoin dominance against Ethereum and other altcoins

Source: CoinMarketCap

Ethereum, on the other hand, stuck with a 19.42% dominance. Other altcoins with solid fundamentals mostly decreased.

Also, if a crypto summer was in the works, prices of these altcoins categorized above would have been increasing. However, this has not been the case. 

For instance, Cardano [ADA] has lost 28.02% of its value in the last 30 days. Polkadot [DOT], despite its strides in development activity, has fallen by 15.68% within the same period. And the list goes on and on.

Dissecting the DeFi dilemma

In the 2020 crypto summer, many tokens under the Ethereum blockchain emerged as several altcoins outperformed Bitcoin. This led to the growth and adoption of DeFi protocols.

Fast forward to 2021, Ethereum became the first major stop for NFTs, sparking a billion-dollar surge in volume and sales. 

Furthermore, the combination of both factors played a vital role as Ethereum’s Total Value Locked (TVL) hit $106.12 billion in November 2021. But at press time, Ethereum’s TVL was down to 24.97 billion.

Ethereum Total Value Locked and fees generated

Source: DefiLlama

The TVL measures the value of assets locked in a distributed application (dApp) or DeFi protocol. Typically, a higher TVL means higher confidence in locking liquidity in smart contract projects. 

So, Ethereum’s fall in this metric suggests that investors were still skeptical about the current market condition and possible yield to get. Like the TVL, a hike in Ethereum fees also serves as an indicator of a crypto summer.

However, these fees have been on a free fall for a while. This suggests a drop in transactions on the blockchain when compared to the previous booms in altcoin interaction. Therefore, the block validator revenue has also been impacted negatively.

Ethereum block validator revenue

Source: TheBlock

Turning a blind eye to the collectibles

Meanwhile, NFTs, which gained immense popularity in 2021, have seen a slowdown in sales and trading volume. According to CryptoSlam, sales volume has decreased by 13.86% in the last 30 days.

How much are 1,10,100 ETHs worth today?

Although recent months have produced peaks and troughs, the inconsistencies in the uptick suggest minimal interest in trading digital collectibles. 

As of this writing, ETH exchanged hands at $1,728. However, its network growth, which had periods of growth, fell sharply to 14,800. Thus, the decline implies new addresses on the blockchain have resisted transacting. Hence, this represents a drop in adoption.

ETH price and Ethereum network growth

Source: Santiment

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