NAIROBI (CoinChapter.com) — Ethereum’s dominance in the cryptocurrency market fell to 15.27% as of Aug. 12, 2024. This decline highlights the growing competition from Solana, whose blockchain’s scalability and low transaction costs are attracting more users and developers.
The downward trend in Ethereum’s dominance raises concerns about its ability to maintain its leading position in the industry.
According to data from Coinglass, ETH’s market cap was $385 billion at the beginning of the month but dropped to $290.7 billion by mid-August. This 24% reduction highlights the challenges Ethereum is facing in an increasingly competitive environment.
Ethereum’s TVL Declines Over 20% in One Month
Ethereum’s Total Value Locked (TVL) has also experienced a dramatic decline. As per data from DeFiLlama, Ether’s TVL decreased by over 20% in the last month, falling from $60.528 billion at the start of July to $48.026 billion by mid-August.
The decline in TVL reflects a broader reduction in user confidence and activity within the Ethereum ecosystem.
The drop in TVL is alarming, as it signifies a reduction in the amount of capital being used within Ethereum-based decentralized finance (DeFi) applications. This decline may be attributed to users migrating to other platforms or the general downturn in the broader crypto market.
Regardless, Ethereum’s falling TVL adds another layer of complexity to its ongoing struggles.
Impact of Lower Gas Fees on Ethereum’s Burn Rate
Ethereum’s burn rate has also reached concerning lows, signaling reduced network activity. On Aug. 11, 2024, only 148.69 ETH were burned, one of the lowest daily amounts recorded this year, as shown in data from The Block.
The reduction is closely tied to the decline in gas fees, which have hovered between 1 and 2 gwei. The lower fees have led to a net ETH emission exceeding 2,100 ETH, further straining Ethereum’s economic model.
The London hard fork, implemented in Aug. 2021, aimed to reduce ETH supply by burning transaction fees. However, the current low burn rate shows this mechanism is becoming less effective.
Gnosis founder Martin Köppelmann proposed increasing the gas limit to boost Ethereum’s Layer 1 activity. However, this solution remains speculative.
Solana’s Rising Dominance and Market Activity
Solana’s market dominance has reached 3.66%, while its TVL remains strong at $4.801 billion. Additionally, Solana’s average funding rate and social dominance metrics indicate increased investor interest and market participation, further solidifying its position as a key competitor to Ethereum.
With a market cap of $69.768 billion and a fully diluted valuation (FDV) of $87.015 billion, Solana is gaining traction and could pose a long-term challenge to Ethereum, particularly as it continues to attract users and developers with its innovative solutions and lower costs.
Analyst Predict ETH.D Potential Breakout
According to a post by crypto analyst FitzoCrypto, Ethereum’s dominance and its pair with Bitcoin (BTC) are showing signs of a breakout. The analysis suggests that despite the current downtrend, Ethereum might find a recovery path if it successfully breaks out of its current pattern.
However, this technical perspective contrasts with the broader market data, which paints a more challenging picture for Ethereum. The recent decline in market cap, TVL, and burn rate suggests that Ethereum faces hurdles in the near term.
Whether Ethereum can overcome these challenges and reassert its dominance remains to be seen.
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