Ethereum Network Activity is Up, So Why are Prices Down? 

There’s something especially infuriating about coins that don’t track with their fundamentals. You expect that when good things happen, their price will go up and vice versa. However, this has not been the case with Ethereum recently. 

Despite the fact that network activity is increasing and DeFi (decentralized finance) is hitting record figures on the network, prices have tracked the same or gone down. So why is no one buying Ethereum

State of the Network

With over 70,000 new addresses created on the Ethereum network being added on a daily basis and far fewer leaving the network, it is hard to deny the strong growth Ethereum is experiencing. Hash rate may be stronger with Bitcoin, but an increased block rate and number of addresses with non-zero balances, things are looking better than most realize. 

Looking at dApp usage on the Ethereum blockchain is another source of positivity. Gods Unchained, MakerDAO, TruffleSuite, and Gitcoin are all moving up in the world. In fact, one of the most interesting statistics here is that approximately 2.5% of Ethereum’s entire supply is locked up in DeFi protocols.  

Most notably of all of these is MakerDAO implementing a protocol upgrade to Multi Collateral DAI, which will allow for Basic Attention Token, as well as Ether, for collateral now. You should expect fluctuations in interest rates while this shift and adjustment period is underway, but in the long-term, this should be the beginning of onboarding for many more cryptocurrencies to be used as collateral. 

A Growing DeFi Community 

Indeed, the DeFi community is in rapid expansion right now, with tons more products coming online. For example, ohmydai was launched in late November and will essentially allow users to create put options on DAI. With every new product that comes online, the network becomes stronger and more interlinked. Ideally, this ends with as robust a network as there is in traditional financial networks, but without many of the inefficiencies. 

So although Ethereum is trading up against Bitcoin, it is still down from $181 USD 3 months ago to $148 USD. This price change represents a consistent downwards push on Ethereum, but also highlights the unique price dynamics it has. As the second-largest cryptocurrency by market capitalization (as well as reputation), its price dynamics are the least likely to mimic Bitcoin’s. In a way, it is one of the few cryptocurrencies to have “a mind of its own”. With most altcoins, you see the prices staying stable (or down) against Bitcoin over the last few months.