Election risk, mixed ETF results, increased competition and focus on Tier 2s negatively impacted performance. Thus, the ETH/BTC ratio fell to three-year lows. Hence, this made for a challenging 2024 for the altcoin. However, according to Bitwise CIO Matt Hougan, ETH offers a potential counter-bet towards the end of the year.
“The leading altcoin is a potential contrarian bet for year-end!”
According to Bitwise CIO Matt Hougan, nobody likes Ethereum right now. That’s because the ETH/BTC ratio has hit a three-year low, dipping below 0.04. But while there are good reasons to worry, he says there is a potential bet towards the end of the year. As you’ve been following on Kriptokoin.com, despite a promising start, it hasn’t been the best year for Ethereum. The altcoin price is up just 1% year-to-date. In contrast, Bitcoin is up 42% in 2024. Ethereum rival Solana has gained 27% year-to-date.
The sentiment in the community is difficult,” Hougan said. He also summarized US election risk, increased competition from Solana, challenging tokenomics and mixed spot exchange-traded fund results as key factors for Ethereum’s descent into the doldrums. Although spot Ethereum ETFs were approved in the US in July, the SEC still considers staked ETH a security, according to Hougan. If Kamala Harris wins the presidential election in November and the Biden Administration remains skeptical of crypto, Ethereum could continue to face regulatory challenges, Hougan said.
Ethereum’s hard times!
Spot Ethereum ETFs, including Bitwise’s ETHW, have seen mixed results compared to their Bitcoin-based counterparts. Headwinds from rising competitors like Solana and other altcoin projects are also crowding the space, according to Hougan. “It’s kind of cool in crypto circles to be bullish on Solana and other new blockchains and bearish on Ethereum because of its older, more expensive technology,” Hougan said.
Meanwhile, Ethereum has focused on increasing transaction throughput on Layer-2 networks. This has therefore been successful in shifting transaction volume away from the Ethereum underlying blockchain. However, because of this success, revenues fell to a four-year low. “Many people have moved away from Ethereum’s underlying Layer 1 Blockchain. Therefore, one wonders if Ethereum is shooting itself in the foot,” Hougan adds.
Why is the leading altcoin a good contrarian bet?
Hougan acknowledges the impact of these challenges on sentiment and price. Despite this, the Bitwise CIO says they miss a broader point. Hougan says that while Ethereum and Solana are both trying to create a “public computer” for decentralized applications, those seeing “groundbreaking success” are almost all dominated by Ethereum. He notes that more than half of the stablecoins mined on the network are locked on the Blockchain, including more than 60% of DeFi assets. It is also the preferred settlement layer for the popular forecasting platform Polymarket.
BlackRock’s on-chain US Treasuries fund, with more than $500 million in assets under management, is also on Ethereum. Nike’s NFT platform is on Ethereum. Hougan notes that Ethereum has the most active developers, the most active users, a multi-billion dollar ETF market and a market capitalization five times larger than its closest competitor. The list goes on and on. Accordingly, Hougan adds the following:
It’s like the Microsoft of blockchains. Everyone wants to talk about Google, Slack and Zoom, and for good reason: Each has brought game-changing technologies to the market. But Microsoft is still bigger than all of them combined. (…) None of Ethereum’s challenges seem existential, and its opportunities are enormous. I think the market may reevaluate Ethereum as we get closer to the November elections and any regulatory clarity emerges. For now, it looks like a potential contrarian bet by the end of the year.
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