Since May 12, the Ether price has been struggling to hold its support level of $1,800 as investors face pressure from the worsening crypto regulatory environment and high gas fees from the Ethereum network. Also negatively impacting the price of Ether (ETH) are three indicators pointing to reduced demand for its decentralized applications (DApps) and a lack of leveraged buying demand from professional traders.
Regulators flag their plan to further limit crypto intermediaries
According to court documents filed May 15, the United States Securities and Exchange Commission (SEC) has given a formal response in court regarding Coinbase’s request for clear regulation of cryptocurrencies. The SEC stated that any rulemaking can take years and that enforcement actions will continue in the meantime.
On May 16, the Council for Economic and Financial Affairs of the European Union, made up of the finance ministers of all member states, approved the highly anticipated Markets in Crypto Assets (MiCA) regulation, which will come into force in mid-2024. .
Some argue that MiCA facilitates business growth in the region. Others focus on the privacy risks of users’ personal data and the risks imposed on non-custodial solutions, including decentralized finance applications.
The drop in DApp deposits is worrying
The Ethereum network is experiencing problems caused by rising gas fees, the cost associated with transactions, including those made using smart contracts. For the past four weeks, the average transaction fee has remained above $9, severely limiting the demand for DApp usage.
Total deposits on the Ethereum network in terms of Ether fell to their lowest levels since August 2020. Said analysis excludes the effects of native participation in Ethereum, which recently began allowing withdrawals.
According to DefiLlama data, Ethereum DApps reached 14.9 million ETH in total value locked (TVL) on May 16. That compares with 16.5 million ETH two months earlier, a 10% decrease. For comparison, TVL on BNB Smart Chain in terms of BNB (BNB) was broadly flat over the same period, while Polygon (MATIC) deposits on the Polygon network increased by 29%.
BNB Smart Chain tries to take the lead in DEX volume
Ethereum might have been the outright leader in decentralized exchange (DEX) volume since its inception, but this position is coming into question. Ethereum’s market share by volume in DEXs peaked at 75% in the week ending March 5, but steadily declined to its lowest level of 39.6% in the week ending May 14 .
![](https://technicalterrence.com/wp-content/uploads/2023/05/1684271225_669_3-Reasons-Why-Ethereum-Price-Could-Trouble-At-The-19K.png)
Gainers since March 5 in DEX trading volume were Arbitrum, which increased from 7% to 14%, and BNB Smart Chain, which grew from 5.6% to 31%. It could be argued that the success of Ethereum network scaling solutions reflects optimism for the price of Ether, but that relationship is not that direct.
Related: Updated European Tax Directive Requires Reporting on All Crypto Asset Transfers
Data Shows Professional Traders Turn Bearish
Ether quarterly futures are popular with whales and arbitrage desks. However, these fixed-month contracts are generally trading at a slight premium in the spot markets, indicating that sellers are asking for more money to delay settlement.
As a result, ETH futures contracts in healthy markets should trade at a 5-10% annualized premium, a situation known as contango, which is not unique to crypto markets.
![](https://technicalterrence.com/wp-content/uploads/2023/05/1684271225_918_3-Reasons-Why-Ethereum-Price-Could-Trouble-At-The-19K.png)
Professional Ether traders have avoided leveraged longs (bullish bets) since early April. Also, the current ETH futures premium of 1% is about to turn negative, known as lagging; if confirmed, it is an alarming red flag as bearish demand dominates the scene.
In summary, these three indicators, namely reduced TVL, DEX market share at an all-time low, and lack of leveraged buying demand, indicate that the $1,900 resistance will be difficult to break anytime soon. For now, Ether bears are in control, favoring the odds of a price correction.
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 herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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