Ethereum Surges Past $3.1K After Regulatory Win

On May 17, the price of Ether (ETH) soared by 5.5%, nearly reaching $3,100, a level it hadn’t seen in ten days. This price increase was largely attributed to a reduction in demand for fixed-income investments following stagnant U.S. retail sales data for April. The lackluster sales figures spurred market speculation that the U.S. Federal Reserve might cut interest rates to stimulate the economy. Such expansionary monetary policies generally have a positive effect on riskier markets because they often lead to increased money supply and reduced borrowing costs for businesses and consumers. Consequently, investors sought out limited-supply assets, including cryptocurrencies, pushing gold to $2,410, close to its all-time high.

Ether’s upward momentum was further supported by a significant ruling from the U.S. Department of Justice (DoJ), unsealed on May 15. The indictment accused two individuals of committing wire fraud and money laundering by manipulating the Ethereum blockchain. Notably, the indictment described Ethereum as a decentralized blockchain network that operates without a central authority. The court’s recognition of Ethereum’s decentralized nature, particularly its smart contracts that enable transactions without intermediaries, bolstered the confidence of Ether investors.

Adding to this sentiment was the reaction to the U.S. Securities and Exchange Commission’s (SEC) Wells notice issued to Robinhood on May 4. The notice was related to allegations of securities violations concerning crypto listings and custodial operations on the platform. Orlando Cosme, founder and CEO of Lexproof, commented that the recent court decision contradicts the SEC’s stance on classifying ETH as a security, noting the absence of managerial or entrepreneurial efforts by others. While this doesn’t directly affect the likelihood of U.S. spot Ethereum exchange-traded funds (ETFs) gaining approval, it certainly cheered up market participants.

The SEC is expected to give its final decision on VanEck’s spot Ethereum ETF application by March 23 and on the conversion of Grayscale’s ETHE fund by June 18. Analysts currently estimate the chances of approval at less than 35%. The weakening case for classifying Ether as a security could have played a role in ETH’s rally above $3,050 on May 17.

Solana co-founder Anatoly Yakovenko lauded the security of Ethereum’s network, pointing out that orchestrating an invalid state transition or a double spend attack would be exceedingly difficult. On May 17, Yakovenko emphasized that layer-2 scaling solutions minimized costs without sacrificing security, thanks to the network’s extensive number of validators and operators. Investors understood that Ethereum’s setbacks, such as high transaction fees and relatively slow scalability developments, were deliberate choices aimed at ensuring security and decentralization.

In contrast, competing platforms like Solana (SOL) and BNB Chain (BNB) have adopted solutions that enable higher processing capacities, although this comes at the cost of increasing reliance on fewer entities. Ethereum’s sustained dominance in decentralized applications (DApps) demonstrates its enduring appeal and resilience.

Ethereum’s supremacy is clear when examining its activity in the DApps space. Layer-2 solutions such as Base, which gained popularity due to its low fees and integration with Coinbase, further underscore Ethereum’s capacity to serve as a global settlement layer. Ethereum’s DApp volume over the past 30 days reached $181.5 billion, which is more than seven times higher than its closest competitor, BNB Chain. This volume only declined by 3% compared to the previous month, whereas BNB Chain and Solana saw drops of 52% and 41%, respectively.

The number of unique active addresses (UAW) interacting with DApps further emphasizes Ethereum’s strength. While BNB Chain and Solana experienced significant declines, Ethereum saw a 3% increase in UAW over 30 days. Standout projects on the Ethereum network included Balancer, which recorded a 34% increase in volume, Morpho Optimizers with an 80% rise, and DODO, which achieved a 61% boost.

Despite the low odds of U.S. spot Ethereum ETF approval, the enduring dominance of the Ethereum network in the DApps ecosystem remains undisputed. This recognition has played a significant role in the recent gains in ETH’s price, reinforcing investor confidence in the network’s long-term potential.