Three Reasons Why Ethereum Price Remains Below $1900

Ethereum Price Stays Below $1900 3 Reasons

Author: MARCEL PECHMAN, COINTELEGRAPH; Translation: Song Xue, LianGuai

Since July 21st, the price of Ethereum has been locked in a narrow trading range of $1,800 to $1,900. Despite recent positive developments, including the launch of a Ethereum-based stablecoin by LianGuai and the surge in demand for Ethereum-based exchange-traded funds, this significant lack of volatility has brought uncertainty and doubt to investors.

LianGuai’s entry into the cryptocurrency world may signify an important step towards mainstream adoption of Ethereum. However, this move has also raised concerns about centralization and the potential loss of personal asset control.

Meanwhile, the U.S. Securities and Exchange Commission has recently witnessed a surge in applications for Ethereum ETFs, reflecting a trend of major asset management companies seeking to establish spot Bitcoin ETFs.

Concerns are raised by the decline in ETH DApp deposits and active users

The Ethereum network has been experiencing problems due to high gas fees, which are the costs of transactions, including those completed through smart contracts. Over the past two months, the average transaction fee has exceeded $4, limiting the demand for its decentralized applications (DApps).

Total ETH deposits in Ethereum network applications. Source: DefiLlama

The total locked value (TVL) of deposits on the Ethereum network has significantly decreased. According to DefiLlama, this decline marks the lowest TVL level observed in the past three years.

Although there may have been some changes in this trend over the past week, the current situation still reflects a significant decrease in Ethereum deposits. Specifically, it is about $12.9 million compared to $14.75 million recorded three months ago.

To determine whether the decline in Ethereum TVL is related to a decrease in its user base, investors should monitor the usage of DApps. It is worth noting that certain DApps (such as gaming platforms and marketplaces) do not require a large amount of deposits.

30-day DApp activity on Ethereum. Source: DappRadar

The number of active addresses using DApps has declined, which is concerning. In the past 30 days, the active users of major DApps on Ethereum have decreased by 25%. This may reflect investors’ dissatisfaction with the cost of network transactions.

Examining ETH derivatives can help determine if the $1,800 level can truly prove to be a reliable support level based on the positions of ETH investors.

Derivative indicators show the demand balance between long and short positions

Ethereum quarterly futures are popular among whales and arbitrage platforms. However, the trading prices of these fixed-month contracts are usually slightly higher than the spot market, indicating that sellers require more funds to defer settlement. Therefore, the annualized premium for ETH futures contracts in a healthy market should be between 5% and 10%, a situation known as futures premium, which is not unique to the cryptocurrency market.

Ethereum 3-month futures annualized premium. Source: Laevitas

Based on the futures premium (also known as the basis indicator), professional traders in the Ethereum market have still been unable to take a bullish position since July 16. The current level of 5% hovers on the edge of the neutral to bearish threshold, indicating a demand balance between leveraged long and short positions.

Coinbase’s Base network went live on August 9, which may help ETH challenge the $1,900 mark. Several development teams within the ecosystem have announced their Base network products, which currently include a version of the decentralized exchange Uniswap.

While the potential approval of ETFs and the large user base of LianGuaiyLianGuail stablecoin have boosted the bullish prospects for Ethereum, the Ethereum network finds itself facing competition from existing smart contract platforms and well-resourced challengers. This situation brings uncertainty to the support level at $1,800.