- Ethereum fees and TVL fell as Bitcoin dominance continued to crush the possibility of an altcoin season.
- Both NFT market volume and network growth declined.
While many unfortunate incidents rocked the 2022 crypto market, participants seemed to have survived fears of repeated capitulation. While the first half of the new year may have offered some respite, there were signs that the crypto winter wasn’t quite over.
Read Ethereum [ETH] Price prediction 2023-2024
A compelling reason for this is the position of Ethereum [ETH] and the sectors that operate under the blockchain. According to IntoTheBlock, the DeFi And NFT industries are plagued by lower user engagement and a decline in trading activity.
Market patterns point to another #SlowSummer. For 3 of the last 4 years, #ETH rates are reduced during the summer months. Eth on-chain activity dips also coincided with lower prices. The current trend suggests a new season of falling prices, such as #DeFi and NFT activity slows down pic.twitter.com/FcZrW4vLXV
— IntoTheBlock (@intotheblock) June 17, 2023
ETH did not topple BTC
Historically, this indicates that there may not be a crypto summer in this cycle. In a quick definition, a crypto summer describes a bullish phase in the cryptocurrency market. This period also comes with greater adoption, rising prices of altcoin, and a decrease in Bitcoins [BTC] dominance.
For context, Bitcoin dominance refers to the ratio between the market capitalization of the king coin and the total market capitalization of the cryptocurrency. As it went to press, CoinMarketCap revealed that its dominance had increased to 48.11%.
Source: CoinMarketCap
Ethereum, on the other hand, stuck with 19.42% dominance. Other altcoins with solid fundamentals tended to decline.
And if a crypto summer was in the works, the prices of these altcoins categorized above would have increased. However, this has not been the case.
For example, Cardano [ADA] has lost 28.02% of its value in the last 30 days. Dot [DOT], despite its progress in development activity, it has fallen by 15.68% over the same period. And the list goes on and on.
Dissecting the DeFi Dilemma
In the crypto summer of 2020, many tokens under the Ethereum blockchain emerged as several altcoins outperformed Bitcoin. This led to the growth and adoption of DeFi protocols.
Fast forward to 2021, Ethereum became the first major stop for NFTs, leading to a multi-billion dollar increase in volume and sales.
Moreover, the combination of both factors played a vital role as Ethereum’s Total Value Locked (TVL) reached $106.12 billion in November 2021. TVL of Ethereum fell to 24.97 billion.
Source: DefiLlama
The TVL measures the value of assets locked in a distributed application (dApp) or DeFi protocol. Typically, a higher TVL means more confidence in locking in liquidity in smart contract projects.
Thus, Ethereum’s drop in this metric suggests that investors were still skeptical about current market conditions and potential returns. Like the TVL, a walk in Ethereum fees also serves as an indicator of a crypto summer.
However, these fees have been in free fall for some time now. This suggests a decline in the number of transactions on the blockchain compared to the previous explosions in altcoin interaction. So the block validator income also negatively affected.
Source: The Block
Turn a blind eye to the collectibles
Meanwhile, NFTs, which surged in popularity in 2021, have seen a slowdown in sales and trading volume. According to CryptoSlam, revenue is down 13.86% in the last 30 days.
How many Worth 1,10,100 ETHs today?
Although the past few months have produced peaks and troughs, the inconsistencies in the upswing indicate minimal interest in trading digital collectibles.
At the time of writing, ETH was switching hands at $1,728. It is however network growth, which experienced periods of growth, fell sharply to 14,800. The drop thus implies that new addresses on the blockchain have resisted transactions. This means a drop in adoption.
Source: Sentiment