Ether (ETH) experienced a 5.5% price increase on May 17, approaching $3,100 for the first time in 10 days. This surge was attributed to a decline in demand for fixed-income assets after the release of stagnant retail sales data in the US for April. The market interpreted this data as a potential sign for the US Federal Reserve to cut interest rates in order to stimulate the economy.
Historically, expansionary measures by the central bank have been viewed as positive for risk-on markets, whether due to an increase in the money supply or a reduction in credit costs for businesses and individuals. This led investors to seek out scarce assets, including cryptocurrencies, resulting in gold reaching $2,410, just 0.8% below its all-time high.
Ether’s rally was further fueled by a court ruling and a US Department of Justice indictment. The court ruling affirmed the decentralized nature of the Ethereum blockchain and the use of smart contracts for transactions without the need for a trusted intermediary. This gave investors confidence, especially after the US Securities and Exchange Commission issued a Wells notice to Robinhood, a trading platform, on May 4 for alleged securities violations related to crypto listings and custodian operations.
The verdict contradicted regulators’ classification of ETH as a security, as it highlighted the lack of management or entrepreneurial efforts by others. While this analysis does not directly impact the approval odds of US spot Ether exchange-traded funds (ETFs), it did boost investor sentiment.
The final ruling on VanEck’s spot Ether ETF request is expected on March 23, and the conversion of Grayscale’s ETHE fund will be ruled on by June 18. Analysts predict approval odds to be below 35%, but the case for classifying Ether as a security instrument has weakened, which may have contributed to the price rally on May 17.
Anatoly Yakovenko, co-founder of Solana, praised Ethereum’s network security and highlighted its ability to prevent invalid state transitions and double spend attacks. He also emphasized how layer-2 scaling reduces costs without compromising security due to the large number of validators and operators on the network.
In summary, investors recognized that Ethereum’s decisions prioritizing security and decentralization, even at the expense of high transaction fees and limited scalability, were a strategic choice. Competitors like Solana and BNB Chain opted for solutions that allowed for higher processing capacity but increased dependency on fewer entities.
Ethereum’s dominance in decentralized application (DApp) activity further demonstrates its strength. The growth of layer-2 solutions such as Base, which offers low fees and integrates with Coinbase, reaffirms Ethereum’s potential to become a global settlement layer.
Analyzing DApp volumes and unique active addresses, Ethereum outperformed its competitors. Its $181.5 billion in DApp volume over 30 days was more than seven times larger than BNB Chain. The volume only decreased by 3%, while BNB Chain and Solana experienced significant declines.
In conclusion, while the approval odds for a US spot Ether ETF remain low, investors are realizing that Ethereum’s dominance in the DApp ecosystem remains unaffected. This realization contributed to the price increase of ETH on May 17.
Note: This article does not provide investment advice. Readers should conduct their own research before making any investment decisions.