From Low Fees to ETF Struggles, Ethereum (ETH) Faces Mounting Pressure

The performance of the market’s favorite altcoin, Ethereum (ETH), has been hampered by problems with its network in the past few months.

As these problems persist, ETH’s price troubles may linger longer than anticipated.

Ethereum Faces Low User Activity, ETF Sees Outflows

The Ethereum network has witnessed a decline in user demand over the past few months. Artemis data shows that the past 90 days have been marked by a 6% drop in the count of unique active addresses that have completed at least one transaction on the Layer 1 (L1) network.

A decline in active users on a blockchain network typically leads to a drop in daily transaction counts, and Ethereum has experienced this trend over the past 90 days. On-chain data reveals that Ethereum’s daily transaction count has decreased by 5%.

This reduction in user activity has also affected the network’s fees. According to DefiLlama, by the week ending August 31, Ethereum’s network fees had fallen to $3.1 million, their lowest level in more than four years.

Ethereum Network Fees. Source: DefiLlama

While the drop in Ethereum’s activity may suggest successful adoption of Layer-2 (L2) scaling solutions, it poses a long-term risk to the network. If users increasingly shift to L2 networks for transactions, Ethereum’s base layer could see a decline in economic activity and revenue over time.

In addition to network challenges, Ethereum faces another issue: outflows from spot ETH exchange-traded funds (ETFs). Despite high expectations that these ETFs would boost market sentiment, they have consistently recorded weekly outflows. Since their launch on July 26, the funds have seen inflows in only one week. Now in their seventh week, outflows have exceeded $750 million.