Despite the recent approval of the Ethereum spot exchange-traded fund (ETF) by the US Securities and Exchange Commission (SEC), Ethereum's price has failed to hold above $3,800. This is surprising given that Ethereum was trading at $3,943 just two days earlier. The market had been uncertain about the approval odds, so the decision, particularly its timing, caught many off guard.

However, Ethereum's lackluster performance can be attributed to several factors, including stagnant network use, high fees, and regulatory uncertainty. The Ethereum network's usage metrics have shown a lack of growth in decentralized applications (DApps) volumes and deposits over the past 30 days. Additionally, the total value locked (TVL) in the Ethereum network declined by 6% after reaching a peak of 18.3 million ETH on May 16.

Furthermore, several DApps failed to attract more than 4,000 addresses, raising concerns about the total addressable market for this network, especially when competitors offer much lower fees. Miner-extracted value (MEV) has also posed another challenge for Ethereum, leading to network congestion and higher gas fees. MEV is a practice where validators organize transactions within a block to generate profits, such as creating slippage on DEX exchanges or front-running NFT mints.

Regulatory uncertainty continues to cast a shadow over Ethereum, with ongoing regulatory actions against Consensys and the Ethereum Foundation. Some analysts claim that until the SEC signs off on the S-1 registration statements, Ethereum's classification as a non-security instrument remains an open question. In April, Consensys received a Wells notice from the SEC concerning MetaMask's trading and staking services. Moreover, reports by Fortune magazine in March indicated that the regulator was investigating firms with alleged connections to the Ethereum Foundation regarding its staking services, perpetuating the regulatory uncertainty and further affecting Ethereum's performance.

The approval of the Ethereum spot ETF is a positive regulatory development, classifying Ethereum as a digital commodity, according to Paul Grewal, Coinbase's Chief Legal Officer. However, the ongoing regulatory actions and investigations create uncertainty, making it challenging for Ethereum to gain traction and attract new investors.

In addition, Ethereum's network metrics show no signs of improvement. The TVL in the Ethereum network declined by 6% after reaching a peak of 18.3 million ETH on May 16. This metric does not consider DApps that do not require a large deposit base, such as non-fungible token (NFT) marketplaces, games, social networks, and collectibles. A detailed examination of the network's leading applications reveals a significant volume concentration in Uniswap, the top decentralized exchange (DEX). Ethereum top DApps ranked by 30-day volumes show that seven of the top ten Ethereum DApps saw a decrease in active addresses. Uniswap, the leader, experienced a 25% drop in activity.

The Ethereum ecosystem is facing challenges in attracting and retaining users, which is reflected in the stagnant network usage metrics. The high fees and MEV issues are likely contributing factors, making it difficult for new projects and users to join the network. The regulatory uncertainty and ongoing investigations add another layer of complexity, making it challenging for Ethereum to regain its momentum.

In conclusion, while the approval of the Ethereum spot ETF is a positive regulatory development, Ethereum's performance is hindered by several factors, including stagnant network use, high fees, and regulatory uncertainty. The Ethereum ecosystem needs to address these challenges to attract new users and projects, reduce fees, and improve network congestion to regain its position in the market. Until then, Ethereum's performance is likely to remain lackluster, and its price may continue to trade below its all-time high.