No One Likes Ethereum Right Now

According to Bitwise CIO Matt Hougan, “No one likes Ethereum right now,” as the ETH/BTC ratio recently hit its lowest level in three years, below 0.04. However, he suggests that despite valid concerns, Ethereum offers a potential contrarian bet heading into year-end.

A Challenging Year for Ethereum

Despite a promising start, 2024 has not been favorable for the second-largest cryptocurrency by market cap, with only a 1% year-to-date increase as per The Block’s Ether Price Page. In contrast, bitcoin has risen by 42% and Solana by 27% over the same period, even as the broader crypto market has suffered.

Community Sentiment

Hougan noted that “the vibes in the community are tough,” largely due to several factors:

• U.S. election risks
• Rising competition from Solana
• Challenged tokenomics
• Mixed results from spot exchange-traded funds (ETFs)

Although spot Ethereum ETFs were approved in the U.S. in July, the Securities and Exchange Commission still views staked ether as a security. If Kamala Harris wins the presidential election and maintains the Biden administration’s skeptical stance towards crypto, Ethereum may continue to face regulatory hurdles.

Performance of Ethereum ETFs

The performance of spot Ethereum ETFs, including Bitwise’s ETHW, has been mixed compared to their bitcoin counterparts. While the new funds netted $2.1 billion in inflows, they were surpassed by $2.8 billion in net outflows from Grayscale’s higher-fee ETHE.

Competition and Revenue Challenges

Rising competitors like Solana are entering the market, leading some crypto enthusiasts to express bearish sentiments towards Ethereum due to its aging technology. Furthermore, Ethereum’s strategy of boosting transaction volume on its Layer 2 networks has resulted in reduced revenues, which have hit a four-year low.

A Broader Perspective

Despite these challenges, Hougan believes that many overlook Ethereum’s overall success. He states that both Ethereum and Solana aim to create a “public computer” for decentralized applications, yet breakthrough successes are predominantly found on Ethereum. He cites:

• Over half of stablecoins issued on the network.
• More than 60% of DeFi assets locked on Ethereum.
• Ethereum as the settlement layer for platforms like Polymarket.

Additionally, BlackRock’s on-chain U.S. Treasuries fund with more than $500 million in assets is tokenized on Ethereum, and the network hosts Nike’s NFT platform. Ethereum leads in developer and user activity, has a regulated futures market, a multi-billion dollar ETF market, and its market cap is five times larger than its closest rival.

Conclusion

In summary, Hougan compares Ethereum to Microsoft, emphasizing that while new players like Google, Slack, and Zoom garner attention, Microsoft remains a giant. Despite its challenges, he believes that Ethereum’s established success warrants a reevaluation as the market approaches the November elections and potential regulatory clarity. He sees it as a potential contrarian bet for year-end.