Ethereum, the second-largest cryptocurrency, faces significant challenges in the current market cycle. Despite the recent introduction of spot exchange-traded funds (ETFs), ETH lags behind other major cryptocurrencies like Bitcoin and Solana. This underperformance is notable, considering the anticipated impact of the ETFs on Ethereum’s market position.
ETH 1D price chart
Spot Ether ETFs began trading in the US markets on July 23. Since then, the trading volume has exceeded $329.80 million, with net assets totalling $7.06 billion as of August 7, according to SosoValue. Despite this activity, ETH’s price has dropped over 28% since its ETF debut. In contrast, Bitcoin has seen a rise of over 21% since its spot ETFs launched on January 10, with Bitcoin ETFs reaching about $2.20 billion in total traded volume as of August 7.
SOL and BTC outperform ETH in 2024
Solana and Bitcoin have significantly outperformed Ethereum this year. Solana and Bitcoin are up 41% and 25%, respectively, against Ethereum. Some analysts argue that the launch of Ether ETFs coincided with a period of market retraction, unlike Bitcoin ETFs, which launched during a bullish phase. Historical data indicates that since September 2023, ETH has underperformed compared to BTC and SOL.
SOL/ETH 1D price chart
Following the market downturn on August 5, Solana reached a record high against Ethereum, with SOL/ETH trading at $0.06419. Solana has gained over 41% against Ethereum since the start of 2024 and an impressive 528.7% since September 2023. Additionally, Ether has reached a three-year low against Bitcoin, with the ETH/BTC pair trading at $0.04272, a level not seen since April 2021. Bitcoin has risen 25% against ETH this year and 48.5% since September 2023.
Speculations on Ether’s underperformance
The reasons behind Ethereum’s underperformance this cycle are varied and speculative. Some suggest that Ethereum’s fragmentation of layer-two protocols has diluted the chain’s overall liquidity. Others point to Solana’s increasing market share, particularly in decentralized exchange (DEX) trading volumes.
Data from DeFiLlama reveals that Solana surpassed Ethereum in monthly DEX trading volume in July, with Solana reaching $55.876 billion and Ethereum posting $53.868 billion. This Solana volume surge is attributed to a memecoin frenzy, with Solana-native memecoin platform Pump. Fun outperformed Ethereum in 24-hour revenue on July 29.
Jump trading’s influence
Jump Trading, a major crypto market maker, has also been selling off its Ether holdings, adding to the market concerns. Lookonchain reported that Jump sold 120,695 wstETH worth $481 million on August 5, coinciding with a broader market dip. Previously, Jump had sold another 83,000 wstETH for $377 million since July 24, which preceded a 33% drop in ETH price. Additionally, Jump moved another 11,501 ETH, valued at $29.11 million, from Lido for sale and applied to redeem an additional 19,049 ETH, worth $48.22 million.
The market maker’s significant sell-off has sparked speculation about the reasons behind these moves. While it is unclear if Jump Trading is reducing its ETH holdings due to market uncertainties, reports indicate that the company is under investigation by the U.S. Commodity Futures Trading Commission.
Ether’s struggle in the current market cycle highlights the challenges the cryptocurrency faces, especially compared to the gains seen by Bitcoin and Solana. The market dynamics, influenced by ETF launches and significant trading activities, continue to shape the performance and prospects of these major cryptocurrencies.