The price of Ether (ETH) has been struggling to maintain its $1,800 support level since May 12. The high gas fees associated with transactions and a worsening regulatory environment are creating pressures for investors. Additionally, three indicators are signaling a lack of demand for decentralized applications (DApps) and a lack of leverage buying demand from professional traders.

The United States Securities and Exchange Commission (SEC) recently responded to Coinbase’s petition for clear crypto regulation. The SEC stated that any rulemaking may take years, and enforcement actions will continue in the meantime. On May 16, the Economic and Financial Affairs Council of the European Union approved the Markets in Crypto-Assets (MiCA) regulation, which will come into effect by mid-2024. While some see this as a positive for business growth, others are concerned about privacy risks and the impact on non-custodial solutions, including decentralized finance applications.

The Ethereum network is experiencing problems due to surging gas fees, which have exceeded $9 for the past four weeks. This has limited the demand for DApp usage, and total deposits on the Ethereum network in Ether terms have dropped to their lowest levels since August 2020. Ethereum DApps reached 14.9 million ETH in total value locked (TVL) on May 16, compared to 16.5 million ETH two months prior, a 10% decline. In contrast, TVL on BNB Smart Chain in BNB terms remained flat, while Polygon deposits on the Polygon network increased by 29%.

Ethereum’s market share by volume on decentralized exchanges (DEXs) has steadily declined, reaching its lowest level ever, 39.6%, in the week ending May 14. Arbitrum and BNB Smart Chain have seen gains in DEX trading volume, and the success of Ethereum’s scaling solutions does not necessarily reflect bullishness for Ether’s price.

Ether futures contracts typically trade at a slight premium to spot markets, but the current 1% ETH futures premium is on the edge of becoming negative. This lack of leverage buying demand from professional traders is an alarming red flag, as bearish demand dominates the scene.

In conclusion, the reduced TVL, record-low DEX market share, and lack of leverage buying demand make it difficult for Ether to break its $1,900 resistance in the short term. Ether bears are currently in control, and a price correction is likely.

Analysis

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