Cryptocurrency investors are beginning to question Ethereum’s investment opportunities. Ethereum has always been seen as the blockchain with a stronger and easier to understand value proposition, as a smart contract platform that can power many different types of applications. Now, investors are considering the possibility that Ethereum may have lost some of its appeal, while Bitcoin’s appeal has never been clearer and broader. Ethereum, the second-largest cryptocurrency by market capitalization, has fallen nearly 50% from its all-time high. Since the merger (which took place two years ago this week), it has lagged Bitcoin by 44% and has not followed Bitcoin’s rally in March to a new record this year. Meanwhile, the Ethereum ETF experienced nine consecutive days of outflows between August 15 and 27, totaling $115 million, and has seen overall net outflows since its launch in July. Meanwhile, the Bitcoin ETF saw inflows on eight of nine days in August, with net inflows of $427 million, and saw strong inflows in the first five weeks after its launch in January. David Duong, director of institutional research at Coinbase, said: “The relative difficulty in educating new investors on Ethereum’s supply schedule and the practicalities of smart contracts, coupled with the lack of staking returns, may lead to a lack of interest in ETH ETFs.” “More local cryptocurrency investors are interested in ETH sentiment may have been hurt by the apparent short-lived nature of previous bull cycle narratives, (such as) deflationary “super-sound money”, and the rise of Solana and other next-generation powerhouse technology competitors. Ethereum is down 2% this year. , while Solana’s SOL token is up 20%. Bitcoin is up 25%. The ETH/BTC ratio, a sentiment indicator reflecting the relative value of Ethereum to Bitcoin, is currently at its lowest level since April 2021. Demand for cryptocurrencies “is primarily for Bitcoin, which has a cleaner and easier-to-understand supply plan than Ethereum. “Bitcoin has a very mature use case, it is a store of value currency,” said Julio Moreno, director of research at CryptoQuant. “Other use cases may still not be as clear as this use case. ETH has changed its narrative many times – world computer (of decentralized applications), DeFi layer, “ultra-sound” currency – so it may make traditional Investors are confused. DeFi, or decentralized finance, protocols account for most of the activity on Ethereum. Citi noted on Friday that ETH-denominated DeFi activity is about 63% higher than recent lows and recently hit a high not seen since the first half of 2023. Significant improvements drive the growth of the Ethereum blockchain. “The continued existence of the DeFi market is downstream of the existence of the ETH market, which means that while DeFi may be great, it is fundamentally limited and unlikely to make cryptocurrency adoption explode 10-100 times again.” Ethereum United Founder Vitalik Buterin said recently on X. Nonetheless, Duong said that Ethereum “remains one of the most trusted neutral developer platforms today… Despite these controversies, growth in DeFi-related areas such as the tokenization of real-world assets is promising. progress. Layer 1 and 2 networks on the Ethereum network (i.e. base layer settlement networks such as Bitcoin or Ethereum, and smaller networks built on top of them (such as the Lightning Network or Coinbase’s Base)) The number of daily unique users increased by more than 150% compared with the 2023 average, but Ethereum’s transaction fee revenue is still at a multi-year low, according to CryptoQuant data. The role of “super-sound money” is not functioning, partly because its supply is increasing. The merger is a 2022 technology upgrade expected to make Ethereum’s infrastructure more energy efficient and slow the rate of supply growth. Some investors had hoped that Ethereum could compete with Bitcoin, whose supply growth slows every four years after a halving. However, Ethereum supply has been growing rapidly this year and is expected to return to pre-merger levels within the next three months, according to CryptoQuant. —CNBC’s Michael Bloom contributed reporting.
Ethereum lags sharply behind Bitcoin as investment case weakens | Real Time Headlines
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