Ether (ETH) saw a significant increase in price on May 17, rising by 5.5% and reaching nearly $3,100. This rally was attributed to a decrease in demand for fixed-income instruments following stagnant retail sales data in the United States during April. The market now expects a potential interest rate cut by the U.S. Federal Reserve to stimulate the economy.
Expansionary measures by the central bank are generally viewed positively for risk-on markets, as they increase the monetary supply or reduce credit costs for businesses and individuals. As a result, investors have sought exposure to scarce assets, including cryptocurrencies. This demand has also driven gold prices to reach $2,410, just 0.8% below its all-time high.
Ether’s surge was further fueled by a court ruling that instilled confidence in Ether investors. The ruling came from a U.S. Department of Justice indictment unsealed on May 15, which accused two individuals of wire fraud and money laundering through the manipulation of the Ethereum blockchain. The court document emphasized the decentralized nature of Ethereum, stating that it operates without the need for a trusted intermediary and that no central actor runs the Ethereum Network. This boost in confidence came at a time when the U.S. Securities and Exchange Commission had issued a Wells notice to the trading platform Robinhood on May 4, raising concerns about alleged securities violations related to crypto listings and custodian operations.
The court ruling contradicts regulators’ classification of Ether as a security and has lifted investors’ spirits. While this verdict does not change the approval odds of U.S. spot Ether exchange-traded funds (ETFs), it has weakened the case for classifying Ether as a security instrument, potentially contributing to the rally above $3,050 on May 17.
The U.S. SEC is expected to announce its final ruling on VanEck’s spot Ether ETF request by March 23 and rule on the conversion of Grayscale’s ETHE fund by June 18. Analysts predict approval odds below 35%, but the regulators’ argument for classifying Ether as a security instrument has been weakened, which may have contributed to the rally.
The co-founder of Solana, Anatoly Yakovenko, praised Ethereum’s network security, highlighting the difficulty of coordinating invalid state transitions or double spend attacks. Yakovenko also noted that layer-2 scaling reduces costs without compromising security, thanks to the large number of validators and operators on the Ethereum network.
Investors have come to realize that the decisions made by Ethereum, such as high transaction fees and a focus on security and decentralization rather than scalability, are in fact prioritizing important aspects. Competitors like Solana and BNB Chain have chosen solutions that prioritize increased processing capacity, but they also come with increased dependency on fewer entities.
Ethereum’s dominance in decentralized application (DApp) activity further demonstrates its strength. Layer-2 solutions like Base, which offers low fees and integrates with Coinbase, the largest crypto exchange in the U.S., reinforce Ethereum’s potential as a global settlement layer. In the past 30 days, Ethereum has generated $181.5 billion in DApp volume, more than seven times larger than its direct competitor, BNB Chain. While BNB Chain and Solana have experienced significant volume decreases, Ethereum’s volume only declined by 3%.
In conclusion, even if the odds of U.S. spot Ether ETF approval remain low, investors are recognizing that Ethereum’s dominance in the DApp ecosystem remains unaffected. This realization has contributed to the price gains of ETH on May 17.
Please note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risk, and readers should conduct their own research before making a decision.