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 USD 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 upgrade series, 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.
