Key takeaways:
Ethereum’s decreasing TVL contrasts rising fees
Ether (ETH) has struggled to reclaim the $2,700 mark despite an 8% gain between June 2 and June 4. Although the price gained 48% between May 5 and June 5, further upside appears limited due to some weak network activity and rising competition.
Total deposits on the Ethereum network, measured by total value locked (TVL), fell to 25.1 million ETH on June 5, marking a 17% decline from the previous month. Ethereum still leads in total deposits, but Solana’s TVL rose 2% during the same 30-day span, reaching 65.8 million SOL (SOL). This suggests that Ethereum’s edge over rivals is gradually eroding.
Key contributors to Ethereum’s TVL decline include Sky (formerly MakerDAO), which dropped 48% to 2.1 million ETH, and Curve Finance, down 24% to 1.1 million ETH.
However, this overlooks the fact that average network fees on Ethereum climbed 150% month-over-month. This fee increase amplifies the protocol’s burn mechanism, reducing ETH’s inflationary pressure.
DEX activity rises, but Solana beats Ethereum by volume
One driver behind the higher fees is the surge in decentralized exchange (DEX) activity. Uniswap has handled more than $2.6 billion in daily volume so far in June, compared to $1.65 billion in early May.
Although this trend supports Ether’s price, rival networks like BNB Chain and Solana have expanded their share of DEX activity. Currently, Ethereum ranks third in this segment.
BNB Chain led in DEX volume growth, though this advantage is less significant due to the network’s extremely low fees. Lower costs make it easier to artificially inflate activity, making comparisons with Solana and Ethereum somewhat misleading.
Related: Ethereum reclaims DeFi market as bots drive $480B stablecoin volume
Even after adjusting for this distortion, however, Solana’s DEX volume has surpassed Ethereum’s. This shift raises questions about whether ETH still maintains a competitive edge.
Notably, top-performing decentralized applications like Hyperliquid and Pump are choosing to launch their own blockchains instead of building on Ethereum layer-2 solutions or using alternatives such as Solana.
ETH futures show a lack of bullish conviction
Futures markets for Ether offer insight into professional traders’ sentiment. In balanced conditions, monthly ETH contracts typically trade at a 5% to 10% annualized premium to reflect the extended settlement period.
As of June 5, the Ether futures premium dropped to 5%, down from 6% a week earlier. This signals a slight reduction in leveraged long positions, though the premium remains within a neutral range. More importantly, the last time ETH futures traded above a 10% premium was in late January, suggesting a persistent lack of bullish conviction.
On the positive side, institutional interest in ETH has grown, reinforcing support near the $2,500 level.
Thus, concluding that institutional demand for Ether is waning would be inaccurate. Between May 22 and June 4, US-based spot Ether exchange-traded funds (ETFs) attracted $700 million in net inflows. Notably, there hasn’t been a single day of net outflows in that three-week period, reinforcing the strength of the $2,500 support level.
Thus, while demand for ETH remains, particularly from institutions, other metrics suggest that the bulls will probably be unable to break $3,000 in the near term.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
