Friday, 19 April 2024

Crypto News

3 reasons why Ethereum price could struggle at the $1.9K level

3 reasons why Ethereum price could struggle at the $1.9K level

Since May 12, Ether (ETH) price has been struggling to sustain its $1,800 support level as investors face pressures from a worsening crypto regulatory environment and the Ethereum network’s high gas fees. Also negatively impacting Ether’s price are 3 indicators signaling reduced demand for its decentralized applications (DApps) and a lack of leverage buying demand from professional traders.

Regulators signal their plan to further limit crypto intermediaries

According to court documents filed on May 15, the U.S. Securities Exchange Commission (SEC) has given a formal response in court in relation to Coinbase’s petition for clear crypto regulation. The SEC stated that any rulemaking may take years and that enforcement actions will continue in the meantime.

On May 16, the Economic and Financial Affairs Council of the European Union — comprising finance ministers of all member states — approved the highly-anticipated Markets in Crypto-Assets (MiCA) regulation, which will come into effect by mid-2024.

Some argue that the MiCA facilitates businesses growth in the region, while others focus on the privacy risks for personal users’ data, and the risks imposed for non-custodial solutions, including decentralized finance (DeFi) applications.

The drop in DApp deposits is concerning

The Ethereum network is experiencing problems caused by surging gas fees, the cost associated with transactions, including those performed by smart contracts. For the past 4 weeks, the average transaction fee has stood above $9, which severely limited the demand for DApp usage.

Total deposits on the Ethereum network in Ether terms plunged to their lowest levels since August 2020. Such an analysis excludes the effects of native Ethereum staking, which recently started to allow withdrawals.

Ethereum network applications’ total deposits in ETH. Source: DefiLlama

According to DefiLlama data, Ethereum DApps reached 14.9 million ETH in total value locked (TVL) on May 16. That compares with 16.5 million ETH two months prior, a 10% decline. As a comparison, TVL on BNB Smart Chain in BNB terms was essentially flat in the same period, while Polygon network’s (MATIC) deposits increased by 29%.

BNB Smart Chain attempts to take a lead in DEX volume

Ethereum might have been the absolute leader in DEX volumes since inception, but this position is being challenged. Ethereum’s market share by volume on decentralized exchanges (DEXs) peaked at 75% in the week ending March 5 but steadily declined…

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