Bitwise: Ethereum is down, but it’s a good contrarian bet

Written by Matt Hougan, Chief Investment Officer at Bitwise

Compiled by: Luffy, Foresight News

Many people are FUDing Ethereum, and the ETH/BTC exchange rate recently fell to its lowest level in three years. Since the beginning of the year, the price of Ethereum has been basically flat, while Bitcoin has risen by 38%, and Ethereum's biggest competitor Solana has also risen by 31%.

Ethereum is in a slump for many reasons:

The risks of the US election: Ethereum faces significant risks in its November move. Bitcoin has largely passed regulatory scrutiny, with even SEC Chairman Gary Gensler admitting it is not a security; Ethereum does not. The SEC appears to believe that staked ETH is a security, and the agency has major concerns about the DeFi ecosystem that drives much of Ethereum’s value. If Harris wins and continues the Biden administration’scryptocurrencyEthereum may face challenges due to skepticism.

Competitors：Ethereum faces newBlockchainchallenges, theseBlockchainProvide higher throughput and lower costs. Solana is a leading representative in this regard, but otherBlockchainIn the crypto market, some people are optimistic about Solana and other newBlockchain, they believe that Ethereum's technology is old and costly.

TokenEconomics faces challenges：In the past few years, EthereumCommunityDecided to focus on growing transaction volume around Ethereum’s Layer 2 network, rather than the Ethereum blockchain itself. The move has been a huge success: transaction activity on Layer 2s like Base, Arbitrum, and Optimism is surging. But the rise of Layer 2 has caused a large amount of transaction volume to shift away from Ethereum, and revenue on the Ethereum network has fallen to its lowest level in four years. Many people wondered if Ethereum had shot itself in the foot by breaking away from the Layer 1 blockchain.

ETF performance mixed: Ethereum ETFs haven’t been as overwhelmingly successful as Bitcoin ETFs. While newly launched ETFs have raised billions of dollars, the Grayscale Ethereum Trust (ETHE) has far outstripped those funds with $2.7 billion in outflows.

These are all valid reasons for concern, but I think people are missing something more important.

In the big picture, blockchains like Ethereum and Solana are indeed trying to create a “public computer”: a global database that anyone can use to build applications. But when you look at the ones that have achieved breakout success, their primary platform is almost always Ethereum:

• Stablecoins: More than half of all stablecoins are issued on Ethereum.

• Decentralized Finance (DeFi): More than 60% of DeFi assets are locked on Ethereum.

• Polymarket: Breakthrough prediction markets on Ethereum.

There are many more examples like this.

This year, when BlackRock wanted to establishTokenWhen .Swoosh launched its Web3 fashion platform, it chose to build on Ethereum. When the next big traditional company wants to do a blockchain product, I bet they’ll choose Ethereum, too.

Ethereum has the most active developers, the most active users, and a market cap 5x that of its closest competitor. It is the only programmable blockchain with some level of regulatory support in the US, with a thriving regulated futures market and a multi-billion dollar ETF market.

It’s like the Microsoft of blockchain. Everyone wants to talk about Google, Slack, and Zoom, and for good reason: They all brought game-changing technology to the market. But Microsoft is still bigger than all of those companies combined.

This doesn’t mean I’m pessimistic about Solana or other blockchains. They are making a big impact and there’s a lot to be excited about. But I think people are overlooking the success of Ethereum and its ecosystem in the real-world asset space.

None of Ethereum's challenges seem life-or-death to me, and its opportunities are numerous. I suspect that as the November election approaches and regulatory clarity emerges, the market may re-evaluate Ethereum. For now, it looks like a good contrarian bet before the end of the year.

The article comes from the Internet:Bitwise: Ethereum is down, but it’s a good contrarian bet

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This article focuses on news, narratives, and primary market financing from July 29 to August 4, 2024! Author: Shard Labs Shard Labs is an organization focused on promoting and accelerating Web3 projects, committed to discovering high-quality projects through investment and research and continuously promoting them through narrative building; Sharding Capital is…