On May 17, 2024, the price of Ether (ETH) surged by 5.5%, nearing the $3,100 zone for the first time in 10 days. Analysts attributed the rally to a drop in demand for fixed-income instruments after stagnant US retail sales data in April. The data increased the market’s expectation of a possible interest rate cut by the US Federal Reserve to boost the economy.
Expansionary measures by the central bank are normally seen as bullish for risk-on markets, whether because of an increased monetary supply or reduced credit costs for individuals and businesses. Investors went after exposure to scarce assets, including cryptos, resulting in gold hitting $2,410, around 0.8% below its all-time high.
A Court Ruling Enhanced Ether Investors’ Confidence
Ether’s surge was also powered by a US Department of Justice indictment that was unveiled on May 15. This indictment accused two people of wire fraud and money laundering by manipulating the Ethereum blockchain. The document said:
“Ethereum is a decentralized blockchain […] without the need for a trusted intermediary. No central actor runs the Ethereum Network.”
Furthermore, the court noted that Ethereum smart contracts support transactions without any trusted intermediary. The statements enhanced Ether investors’ confidence, mostly after the US Securities and Exchange Commission issued a Wells notice targeting the Robinhood trading platform on May 4 over alleged securities violations linked to crypto listings and custodian operations.
Based on a statement by the founder and CEO of Lexproof, Orlando Cosme, such a verdict contradicts regulators’ classification of Ether as a security, “as there would be no management or entrepreneurial efforts of others.” While this analysis does not alter the approval odds of US spot Ether exchange-traded funds (ETFs), it lifted investors’ spirits.
The US SEC is expected to give its final ruling on VanEck’s spot Ether ETF request on March 23 and rule on the conversion of Grayscale’s ETHE fund by June 18. Although the analysts forecast that the approval odds are below 35%, the regulators’ case for classifying Ether as a security instrument seems to have weakened, which may have eventually contributed to the rally above $3,050 on May 17.
Solana co-founder Anatoly Yakovenko praised Ethereum’s enhanced network security, highlighting how coordinating “an invalid state transition or double spend attack” would be almost impossible. In a May 17 post, Yakovenko added that layer-2 minimized costs without compromising security because of the network’s huge number of operators and validators.
In general, investors noticed that whatever setbacks Ethereum encountered, including high transaction fees and its lackluster efforts to boost scalability, were decisions that prioritized security and decentralization. In the meantime, competitors Solana and BNB Chain chose solutions that supported a higher processing capacity, irrespective of the merits of increasing dependency on fewer entities.
Ethereum Network’s Dominance Still Unmatched
Ethereum’s strength becomes evident when analyzing its dominance in decentralized application (dApp) activity. The growth of layer-2 solutions like Base, which rapidly gained traction because of its low fees and integration with the US’s biggest crypto exchange, Coinbase, also enhanced Ethereum’s ability to become a global settlement layer.
Ethereum’s $181.5 billion in dApp volume over 30 days is over seven times bigger than its direct competitor, BNB Chain. More importantly, the volume dropped almost 3% compared to the past month, while BNB Chain and Solana experienced 52% and 41% drops in volume, respectively.
Analyzing distinct active addresses engaging with dApps yields similar results, with Ethereum gaining 3% in 30 days while BNB Chain and Solana encountered steep drops. Highlights from the Ethereum network include Morpho Optimizers, which gained 80% in 30 days, Balancer, which saw a 34% volume increase, and DODO, with a 61% volume boost.
Essentially, even if the United States spot Ether ETF approval odds remain low, investors realize that the network’s dominance in the dApp ecosystem remains unaffected. The realization contributed to ETH’s price gains on May 17.
