The Ethereum spot exchange-traded fund (ETF) was approved by the U.S. Securities and Exchange Commission (SEC) on May 23. Despite this long-awaited move, the price of Ethereum (ETH) failed to hold above $3,800 on May 24, which was surprising given that ETH was trading at $3,943 two days earlier. The market was uncertain about prospects for approval, so the decision, particularly its timing, surprised many.
Ethereum is still 24% below its all-time high
Some market participants were quick to point out that the SEC has yet to approve each source’s individual S-1 filings, a process that could take weeks or even months. This delay, among other factors, is hampering Ethereum’s performance, including stagnant network growth, relatively high transaction fees, and regulatory uncertainty in the United States.
Some of the recent profit-taking likely resulted from anticipation of immediate ETF approval, which led to a 23% surge on May 20, an event often referred to as “selling the news.” Traders bought Ethereum in anticipation of the official announcement, especially after the SEC urged exchanges like the New York Stock Exchange and Nasdaq to speed up their 19b-4 filing processes on May 20.
Despite the hype surrounding the immediate approval of ETFs, Ethereum remains 24% below its all-time high of $4,868 in November 2021, suggesting that enthusiasm has not been enough to push the market cap of Ethereum beyond current $445 billion. Notably, Bitcoin (BTC) is trading just 7% below its all-time high since March 2024, suggesting that other factors are limiting Ethereum’s performance.
Ethereum network metrics show no signs of improvement
Over the past 30 days, Ethereum network usage metrics have shown a lack of growth in volumes and deposits of decentralized applications (DApps).
Total value locked (TVL) on the Ethereum network fell 6% after reaching a high of 18.3 million ETH on May 16. This metric does not take into account DApps that do not require a large deposit base, such as non-fungible tokens (NFTs). ) Markets, games, social networks and collectibles. A detailed look at major network implementations reveals a significant concentration of volume in Uniswap, the leading decentralized exchange (DEX).
Additionally, seven of the top ten Ethereum DApps, ranked by 30-day volumes, saw a decline in active addresses. Uniswap, the leader, saw its activity drop by 25%. Additionally, many decentralized applications have failed to attract more than 4,000 addresses, raising concerns about this network’s total addressable market, especially when competitors offer much lower pricing.
about: DeFi executive says Ether ETFs will “destroy the soul of cryptocurrencies.”
Arbitration Issues Motivate Auditors and Regulatory Uncertainty
Mined Mineral Value (MEV) has been another challenge for Ethereum. This practice, where validators orchestrate intra-block transactions to generate profits – such as creating slippage on DEX exchanges or NFT currencies running on top – leads to network congestion and high gas fees.
Vitalik Buterin, co-founder of Ethereum, addressed this issue on May 17, proposing protocol-level controls to reduce the information available to MEV developers, either by completely decoupling the verification process from block contents or by limiting the ability of the block producer to prioritize certain transactions. Despite Vitalik’s efforts, it is unlikely that a viable solution will emerge in the coming months.
The immediate approval of the ETF is a positive regulatory development, classifying ether as a digital product, according to Paul Grewal, chief legal officer of Coinbase. However, ongoing regulatory actions against Consensys and the Ethereum Foundation continue to cast a shadow. Some analysts say that until the SEC approves its S-1 registration statements, whether Ethereum is classified as a non-security instrument remains an open question.
In April, Consensys received a Wells Notice from the SEC regarding MetaMask’s trading and staking services. Additionally, reports from Fortune in March indicated that the regulator was investigating companies with alleged ties to the Ethereum Foundation regarding staking services, perpetuating regulatory uncertainty and further affecting Ethereum’s performance.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research before making a decision.
