Ether (ETH) saw a 5.5% increase in price on May 17, approaching $3,100 for the first time in 10 days. This surge was attributed to a decrease in demand for fixed-income instruments following stagnant retail sales data in the United States in April. The market now expects a potential interest rate cut by the U.S. Federal Reserve to stimulate the economy.
Typically, expansionary measures by the central bank are seen as positive for risk-on markets. This can be due to an increase in monetary supply or reduced credit costs for businesses and individuals. As a result, investors sought out scarce assets, including cryptocurrencies, leading to gold reaching $2,410, just below its all-time high.
The boost in Ether’s price was also driven by a court ruling and a U.S. Department of Justice indictment. The court ruling highlighted that Ethereum is a decentralized blockchain without the need for a trusted intermediary, increasing investors’ confidence. This came after the U.S. Securities and Exchange Commission issued a Wells notice to Robinhood over alleged securities violations related to crypto listings and custodian operations.
The court’s ruling contradicts regulators’ classification of ETH as a security, as it implies that there would be no management or entrepreneurial efforts of others. While this analysis does not change the approval odds of U.S. spot Ether exchange-traded funds (ETFs), it certainly boosted investors’ morale.
The U.S. SEC is expected to make a final ruling on VanEck’s spot Ether ETF request on March 23 and rule on the conversion of Grayscale’s ETHE fund by June 18. Although approval odds are predicted to be below 35%, the regulators’ case for classifying Ether as a security instrument has weakened, which may have contributed to the rally above $3,050 on May 17.
Solana co-founder Anatoly Yakovenko praised Ethereum’s network security, emphasizing the difficulty of coordinating invalid state transitions or double spend attacks. Yakovenko also highlighted that layer-2 scaling reduces costs without compromising security due to the network’s numerous validators and operators.
Investors realized that Ethereum’s decisions to prioritize security and decentralization, even at the expense of high transaction fees and scalability concerns, were justified. Competitors like Solana and BNB Chain made different choices that allowed for higher processing capacity but increased dependency on fewer entities.
Ethereum’s dominance in decentralized application (DApp) activity further demonstrates its strength. The growth of layer-2 solutions like Base, which integrates with Coinbase and offers low fees, reaffirms Ethereum’s potential as a global settlement layer. Ethereum’s DApp volume over 30 days is more than seven times larger than BNB Chain’s, and it has experienced minimal decline compared to its competitors.
In conclusion, while the approval odds for a U.S. spot Ether ETF may remain low, investors are recognizing that Ethereum’s dominance in the DApp ecosystem remains strong. This realization contributed to the price gains of ETH on May 17.
Disclaimer: This article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment decisions.