Blockchain analytics firm Santiment has released a calm and insightful assessment of Ethereum’s current position in the cryptocurrency market, highlighting its longstanding misperformance on Bitcoin while also providing a subtle perspective on the road ahead.
Ethereum (ETH) has been shocking a 77% price drop against Bitcoin (BTC) since December 2021, reflecting growing uncertainty among long-term holders of the world’s second largest cryptocurrency. ETH’s performance in the US dollar terms wasn’t that bad, but investors who bought it in November 2021, when ETH reached an all-time high of $4,760, have yet to see a profitable exit.
Santimento has admitted that Ethereum is considered “laughing” by critics compared to its biggest capitalisation peer, despite maintaining its second-place spot with a market capitalization 28.2% greater than the 28.2% Tether (USDT).
Santiment has compiled a list of key stories and issues that can explain the relative decline of Ethereum.
- Layer 2 Competition: Ethereum’s development of Layer 2 scaling solutions has increased transaction speeds, but diluting investments with attention and capital away from the ETH itself.
- Investor Confusion: Ethereum’s complex series of upgrades, including changes to Merge and other protocols, leaves many investors uncertain, especially when compared to Bitcoin’s simple “digital gold” narrative.
- Lagging progress and high fees: Network improvements and sustained high transaction fee delays have made users faster and cheaper alternatives.
- Regulatory Concerns: Ethereum’s unclear regulatory classification has made some investors hesitate, especially as Bitcoin has a relatively clear legal status.
- Competitors Rise: Blockchains like Solana and Cardano have begun to move users and developers away from Ethereum and gain traction by providing lower fees and greater efficiency.
- Lack of a clear narrative: With Bitcoin being considered a safe store of value and new altcoins being considered a high-risk, high-reward venture, Ethereum’s position between the two is becoming difficult to present to investors.
- Constant sales pressure: The presence of dyed ETH after the upgrade created a constant sales pressure and suppressed price growth.
Despite the bearish sentiment, Santimento urged the community not to underestimate Ethereum’s achievements. The network remains a hub of innovation led by founder Vitalik Buterin and a dedicated team of developers. Ethereum still has one of the most vibrant ecosystems in crypto, widely adopted across Defi, NFT, and enterprise blockchain applications.
*This is not investment advice.
