Ethereum DApp volumes drop 33% in a week — Is more ETH price weakness ahead?

Ether (ETH) has been trading within a narrow $230 range since Aug. 9, maintaining a solid support level at $2,550. However, this represents a 20% decline from three weeks ago, when ETH closed July above $3,300. This decline follows a broader contraction in cryptocurrency prices, but Ether is encountering specific challenges of its own. The Ethereum network’s decentralized applications (DApps) have seen a significant drop in activity over the past seven days.

Spot Ether ETF flows and weak Ethereum network activity limit ETH price upside

Part of Ether’s failure to sustain a bullish momentum can be attributed to the lackluster performance of spot Ether exchange-traded funds (ETFs). The recently launched ETFs have experienced a combined $30 million in net outflows since Aug. 9, according to data from Farside Investors. Despite these outflows, traders remained optimistic that inflows from major players like BlackRock and Fidelity would counterbalance the outflows from Grayscale’s ETHE, although this remains to be seen.

The Ethereum network continues to lead in terms of total value locked (TVL) and transaction volumes, even though it charges significantly higher fees compared to its competitors. This fee difference presents a challenge, as the user experience on Ethereum does not favor second-layer solutions, thereby creating opportunities for niche markets to gain traction on alternative networks such as Solana (SOL), BNB Chain (BNB), and TON. Indeed, according to DappRadar data, none of the top 12 DApps by user count are based on Ethereum.

Ethereum’s best-performing DApp, Uniswap, reported 114,180 active addresses over the past week. In comparison, Pump.fun on Solana attracted 225,110 active addresses in the same period, while Move Stake on BNB Chain saw 213,010. This comparison does not account for the highly successful Ethereum layer-2 ecosystem, which includes solutions like Base, Optimism, and Arbitrum. These layer-2 solutions reached an all-time high of activity on Aug. 17 with a peak of 348 transactions per second, according to data from L2Beat.

Ethereum TVL increased, but onchain volumes declined

Users undoubtedly value Ethereum’s network security for final settlements, but this strategy results in lower demand for ETH as transactions are aggregated. Consequently, a decrease in Ethereum’s base layer activity can negatively impact ETH prices despite the ongoing growth and development within its layer-2 ecosystem. DappRadar data indicates a significant drop in Ethereum network activity over the past week, providing investors with ample reason for concern.

Ethereum experienced a significant 33% decline in 7-day volumes, dropping to $39.04 billion. This trend was mirrored across its competitors: BNB Chain saw a 26% reduction in activity, Solana’s volumes decreased by 23%, and TON faced a 46% drop in the same period. This widespread decline in activity suggests a general decrease in sector interest rather than issues specific to the Ethereum network.

On a positive note, Ethereum’s total value locked (TVL) grew by 9% in thirty days, reaching ETH 18.6 million on Aug. 18, according to DefiLlama data. In contrast, BNB Chain’s deposits in BNB fell by 3%, and Tron’s TVL in TRX terms declined by 7% over the same period. This divergence reflects medium-term investor confidence in Ethereum’s price.

Related: DeFi market stages a comeback as derivatives surge

Highlights for the Ethereum network include Symbiotic, a restaking solution, reaching $1.58 billion in deposits, and the Magpie Ecosystem, a decentralized finance and yield platform, topping $1.37 billion. While the broader decline in cryptocurrency interest, as seen in falling prices and onchain metrics, suggests that Ethereum may face a longer path to reclaim $3,300, the reduced DApp volumes are not a cause for immediate concern.