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Breaking News: WLFI Price Dips 7% As Eric Trump Leaves World Liberty Treasury Company ALT5 Sigma

Ethereum Moves Sideways, Why ETH’s Price Has Slowed DeFi Activity

Reynaldo Marquez
Reynaldo Marquez
4 years ago
2 mins read
Ethereum ETH ETHUSD

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Ethereum crashed to $1,770 in one of the worst days for the first cryptocurrency by market cap in 2021. At the time of writing, it has reclaimed the high area around these levels and trades at $1,991 with a 4.6% profit in the daily chart.

Ethereum ETH ETHUSD
ETH moves sideways and tries to reclaim the $2,000 mark. Source: ETHUSD Tradingview

A recent report by Glassnode Insights, written by Luke Posey, investigates the implications of these price action in the Ethereum ecosystem. The analyst believes both the cryptocurrency and DeFi token prices are showing weakness with EIP-1559 not having the expected catalyzer effect.

Ethereum’s network has seen low activity and its transaction fees have declined to levels last seen in summer 2020. Most of the activity has been taken by decentralized exchanges with Uniswap still number dominating this metric.

The DEX sector has experienced the highest growth in the ecosystem with a 5,600% increase year over year in terms of volume. This metric has been consolidating around $2 billion daily with an increase in periods of high volatility.

Ethereum ETH ETHUSD
Source: Glassnode Insights

DeFi participants, said Posey, are yield farming stablecoin pairs with high yield to accumulate governance tokens. The analyst said:

Activity has stalled from previously exponential growth as participants sit mostly idle during sideways moves. We can see brief bursts of activity during price volatility, however it quickly slows down as prices stabilize.

On the other hand, long-term ETH holders have more conviction with their accumulation. Governance token holders might have seen more downside as the bears deepen their attack on these assets.

The number of new users on Ethereum has been steady, the analyst added. During April and May, one of the worst months for ETH’s price, this metric stood at 18% and 25%, respectively.

High user growth can be a bullish metric for holders as it is a key metric for adoption, but also a key metric for identifying if there are marginal token buyers. While growth by total user numbers remains strong, growth as a percentage is flattening the curve.

Ethereum ETH ETHUSD
Ethereum users growth in 2021. Source: Glassnode Insights

Demand For USDT On Ethereum Reduced During Market Crash

The reduction of demand for USDT on Ethereum it’s an important metric to understand the current price action. A rise in stablecoin supply usually leads to two scenarios: an increase in transaction fees and high volatility in the market with potential for bullish momentum.

ETH ETHUSD
Source: Glassnode Insights

If the opposite were to happen, a return of high demand and on-chain activity, ETH’s price could react to the upside. In the meantime, short-term ETH holders have seen their gains turn into losses with the aggregated loss for these investors standing at 25% of the market cap.

This creates a scenario where many short-term holders decided to liquidate their investment for the loss if the ETH price continues to decline. On the contrary, they could be more persuaded to hold, if the price moves to the upside with more conviction. The analyst said:

(…) we can conclude that significant volumes of ETH were purchased on the run up from around $2.2k to the ATH, all of which are now underwater. The risk is that these investors could liquidate as prices rally into their cost basis (STH-NUPL = 0). Conversely, if conviction  remains high, they may well hold throughout whatever volatility comes next.

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Reynaldo Marquez
Reynaldo Marquez

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
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