- Ethereum has lagged behind Bitcoin and Solana in the price rally.
- Interest from institutional investors for Ethereum has fallen off a cliff.
- But market watchers are bullish that it’s about to change.
Ethereum is becoming a joke.
Crypto watchers have ridiculed the world’s second biggest cryptocurrency for failing to reach new records like Bitcoin and Solana have. Social media is awash with people making fun of the slow growth of Ethereum this year.
At about $3,300, it’s still almost a third of the price away from recapturing the $4,878 all-time high of November 2021.
However, there are signs that the leading altcoin is about to start moving after languishing around the $3,000 mark for weeks.
“A $500 million wealth management firm asked us to give a presentation on Ethereum to their 100 wealth managers today,” said Ryan Rasmussen, head of research at exchange-traded funds provider Bitwise, on Thursday.
“So, you tell me?”
The comments come after UK bank Standard Chartered’s analyst predicted that Donald Trump’s election victory will catapult Ethereum’s price to an all-time high of $10,000 in 2025.
Republicans winning the White House, Congress and Senate is seen as bullish for the industry as it will potentially pave the way for a more sector-friendly government.
Why the drag?
Ethereum has enjoyed a 35% growth since November 5, but that’s trailing Bitcoin, Solana and XRP that have surged 45%, 62%, and 180% respectively during the same period.
What gives?
Eliezer Ndinga, head of strategy at crypto asset manager 21.co, told DL News there are three chief reasons for Ethereum’s lagging performance.
“There’s a lack of clear-cut narrative; the timing of the ETF in midsummer didn’t help; and third, the rise of Solana,” he said.
Ndinga was referencing the spot Ethereum ETFs that launched in July, which suffered from tendencies of stocks and cryptocurrencies to perform worse during the summer months.
It’s a classic case of “Sell in May and go away,” said Ndinga.
These factors led to institutional investors shirking the ecosystem.
Investor exposure dropped to 26% from its June peak of 63%, according to a report from Crypto Insights Group. CoinShares also said sentiment among investors halved, and is at its lowest level since 2021.
Ethereum ETFs showed signs of life last week with six consecutive days of inflows that led to a net positive position, but investors once again dimmed the lights.
Coinglass notes the ETFs followed with six straight days of outflows.
Hard sell
Ethereum has a value proposition which is hard to explain to investors.
Bitcoin owns the sound money narrative, Solana is faster, and other blockchains are better at allowing data to flow through them.
Ethereum, meanwhile, lacks purpose and identity, said Ndinga.
“It feels like 2G while Solana is 5G,” he added. “At some point, Solana may outpace the value of Ethereum.”
Duncan Trenholme, co-head of digital assets at TP Icap, the world’s largest broker dealer, offered a similar view to DL News this summer when he explained why traditional investors struggle to get their head around Ethereum ETFs.
When it comes to Ethereum, Trenholme fielded questions from institutional clients like, “Is Ether just Bitcoin Lite?” or “Why should it have a place in an investment portfolio?”
Optimism
Ethereum is exploring ways to make the network more exciting for investors.
Earlier in November, Ethereum researcher Justin Drake unveiled a proposal to increase Ethereum’s decentralisation and update its creaking infrastructure.
The proposal aims to reduce old technical issues, implement new cryptographic techniques, protect against future security risks from powerful quantum computers — which could break current encryption — and make transactions faster.
And traders are bullish that the price is about to go up.
Open interest for Ethereum options by bulls is nearly threefold higher than investors betting the price will fall. Moreover, the highest volume of traders with active options to purchase ETH is at $4,000 — suggesting that they expect a rally to ensue soon.
Pedro Solimano is a Markets Correspondent at DL News. Got a tip? Email him at psolimano@dlnews.com.
