ETC Group advised investors to hold Ethereum (ETH), Solana (SOL), and Aptos (APT) due to their strategic importance in the layer 1 blockchain space in an October 8 report.
As Ethereum faces increasing competition from new blockchains, the report highlights the importance of evaluating recent market conditions and its long-term performance.
Ethereum faces challenges
According to the report, Ethereum’s underperformance in the third quarter was due to three main factors, the main one being the Dencun update, which significantly reduced gas fees in order to improve the efficiency of Layer 2 networks .
This led to a drop in transaction fees and network activity on the Ethereum mainnet, which negatively impacted user sentiment towards the network.
Additionally, the stock market crash in early August caused by the unwinding of the carry trade on the Japanese yen led to deleveraging across the entire market, with ETH being one of the hardest hit.
The report notes that the poor performance of Ethereum spot ETFs also contributed to the quarter’s poor performance, namely weak spot exchange-traded fund (ETF) flows. Since launch, Ethereum spot ETFs have seen negative net flows of $546 million, based on data from Farside Investors.
Despite these setbacks, ETC Group’s analysis suggests that Ethereum appears resilient when viewed year-to-date, maintaining a performance index of 101, compared to 128 for Solana and 78 for Aptos.
The report calculates network dominance using the overall Network Dominance Index (CNDI), which combines metrics such as Network Utilization Efficiency (NUE) and Economic Density Index (EDI ).
According to its findings, Ethereum remains the most dominant network, with a market share of 45%, followed by Solana with 35% and Aptos with 20%. The report attributes Ethereum’s enduring market leadership to its well-established ecosystem and consistent user engagement, which have strengthened its long-term position despite increasing competition.
Solana, Aptos growth
According to the report, Solana demonstrated a sustainable ability to attract users and developers based on its net flow growth, which reached $1 billion in the third quarter.
This makes it an attractive asset for investors to hold, as its growth trajectory is likely to continue in a bullish scenario. However, he added that Solana’s dominance could be challenged in the coming months as Aptos gains momentum, which could dampen some of its growth projections.
Despite its relatively low market share, Aptos has shown promise as a competitor in the Layer 1 space, with development activity 23% higher than the average for other networks. The network has capitalized on its success in the blockchain gaming sector and demonstrated a strong ability to efficiently handle high transaction volumes at low costs.
However, the report notes that Aptos faces hurdles in developer adoption due to the relatively new Move programming language, which has yet to gain widespread support. In contrast, Solana’s use of Rust offers mature tools and infrastructure, giving it an advantage.
