Blockchain analytics firm Santiment has published a sobering and insightful assessment of Ethereum’s current position in the cryptocurrency market, highlighting its long-standing underperformance against Bitcoin while also offering a nuanced perspective on the road ahead.
Ethereum (ETH) has seen a staggering 77% price drop against Bitcoin (BTC) since December 2021, reflecting growing anxiety among long-term holders of the world’s second-largest cryptocurrency. While ETH’s performance in US dollar terms hasn’t been all that bad, investors who bought in November 2021, when ETH reached an all-time high of $4,760, have yet to see profitable exits.
Despite maintaining its second-place spot by market cap, 28.2% larger than Tether (USDT), Santiment acknowledged that Ethereum is increasingly viewed as a “laugh” by critics compared to its largest-capitalization peers.
Santiment has compiled a list of key narratives and issues that could explain Ethereum’s relative decline:
- Layer-2 Competition: While Ethereum’s development of Layer-2 scaling solutions has increased transaction speeds, it has also diluted investment by diverting attention and capital away from ETH itself.
- Investor Confusion: Ethereum’s complex series of upgrades, including Merge and other protocol changes, have left many investors uncertain, especially when compared to Bitcoin’s simple “digital gold” narrative.
- Slow Progress and High Fees: Delays in network improvements and persistently high transaction fees have driven users to faster, cheaper alternatives.
- Regulatory Concerns: Ethereum’s unclear regulatory classification has left some investors hesitant, especially since Bitcoin has a relatively clearer legal status.
- Rising Competitors: Blockchains like Solana and Cardano have begun to gain traction, luring users and developers away from Ethereum by offering lower fees and greater efficiency.
- Lack of a Clear Narrative: With Bitcoin being seen as a safe store of value and new altcoins being seen as high-risk, high-reward ventures, Ethereum’s position in between the two has become difficult to present to investors.
- Constant Selling Pressure: The presence of staked ETH after the upgrades led to constant selling pressure, suppressing price growth.
Despite the bearish sentiment, Santiment urged the community not to underestimate Ethereum’s achievements. The network remains a hub of innovation led by founder Vitalik Buterin and a committed team of developers. Ethereum still has one of the most vibrant ecosystems in crypto, with widespread adoption across DeFi, NFTs, and enterprise blockchain applications.
*This is not investment advice.
