Ethereum price takes a hit as over $40 billion leaves DeFi protocols

The total capital locked on all Ethereum smart contracts has increased from AU$139 billion to AU$97 billion in the past 30 days.

  • While monetary inflows into ETH have recently fallen quite dramatically, investors have continued to pump funds into rival networks such as Solana and Cardano.
  • Ethereum balances on all exchanges have increased by 550,459 ETH since May.
  • ETH’s total cap currently stands at A$316 billion (US$228 billion), with the altcoin boasting a 17% crypto market share.

Over the past 6 months, Ethereum has lost more than 50% of its value as the altcoin struggles to break above the psychological threshold of 2,800 Australian dollars (2,000 US dollars). ETH is currently trade at AUD$2,594.

Ethereum’s lackluster price action continues to be compounded by massive sales. Based on year-to-date (YTD) data, investors have withdrawn a total of A$346 million (US$250 million) from various ETH-centric investment offerings. This was not the case for other cryptocurrencies, with Bitcoin, Solana, and Cardano seeing YTD payouts of $369 million, $104 million, and $9 million respectively.

The continued success of ETH hinges on a potential boom in decentralized finance (DeFi), with the asset hosting the majority of all decentralized applications (dApps) operating in this space. As of June 5, the Ethereum network claims around 65% of the total capital locked in the DeFi ecosystem. This metric, although apparently quite large, has been on the decline. Since May 9, the capital locked on all ETH-based dApps has increased from $100 billion to $69 billion.

As the Federal Reserve continues to tighten monetary policies, analysts like Ilan Solot, partner at multi-strategy hedge fund Tagus Capital, to believe that things might not improve for ETH anytime soon, adding, “The world is in a recession and people need to pay $4.5 per gallon for gas. They will have less to invest in DeFi or spend on blockchain games.”

How to buy Ethereum

Where is ETH going?

The traders are not too bullish on the outlook for ETH, with the altcoin showing potential to drop as low as AUD1,850 (US$1,350) in the near term. The altcoin is also seeing growing balances on global exchanges, suggesting possible mass liquidations. Since early May, ETH reserves on various trading platforms grew up of 550,459 ETH (worth around AU$1.3 billion).

Ether has continued to fluctuate within a horizontal price range of AU$2,500-3,000 for over a month now, forming what is known as a “descending triangle”. It is a bearish indicator that occurs during a downtrend. It will be interesting to see whether or not the altcoin is able to break out of its ongoing rut anytime soon.

Disclosure: The author owns a range of cryptocurrencies at the time of writing.

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