In a recent report, DeFi analyst and market researcher Ignas provided a detailed analysis of the current bearish and bullish cases for the leading altcoin, Ethereum (ETH), offering valuable insights into the cryptocurrency’s outlook.
Factors Behind Ethereum’s Underperformance
Ethereum has struggled to keep pace with its crypto peers over the past two years, down 47% from Bitcoin (BTC) and underperforming Solana (SOL) by 6.8x since the early 2023 market lows.
According to For Ignas, the reasons for this underperformance are open to debate, but a few key factors stand out. First, the “digital gold” narrative around Bitcoin is easier for new retail users and institutions to understand than Ethereum’s more complex story.
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Additionally, the growing importance of Solana, which is catching up with or sometimes surpassing Ethereum in terms of active users, transaction volume, and the mindshare put pressure on the leading smart contract platform.
“Solana is a riskier bet (with a lower market cap) on smart contract adoption, while Ethereum is stuck in the middle,” Ignas says. “Ethereum’s modular approach with layer-2 solutions has also led to liquidity fragmentation and a more complex user experience.”
However, the researcher remains optimistic about Ethereum’s long-term potential, citing several compelling reasons to keep an eye on it.
Network effects and real use cases
- Efficient and Deflationary Network: If Ethereum gas prices remain around 20 Gwei, the network is considered deflationary and scalable, making it an attractive and efficient option for users.
- Decentralization and security: Ethereum’s decentralization and security have attracted the trust of major institutions including BlackRock, PayPal, JPMorgan and Santander, which are testing blockchain settlement and tokenization on the platform.
- Mature DeFi Ecosystem: Ignas argues that Ethereum and its Layer-2 solutions have “the most mature decentralized finance (DeFi) ecosystem” in the crypto space, with large combined total value locked (TVL) and trading volume, attracting more users and driving up gas fees and ETH burning.
- Network Effects: Ethereum’s first-mover advantage and larger developer market share contribute to its network effects, solidifying its position as the leading smart contract platform.
- Real-World Asset Tokenization: Ethereum is becoming the preferred chain for real-world asset (RWA) tokenization, with 52% of all stablecoins and 73% of all US Treasuries currently tokenized on the platform.
The neglected catalyst?
Another catalyst that few people talk about but could have a significant impact, according to the researcher, is the upcoming Pectra upgrade, expected in the first quarter of 2025.
This upgrade, which merges updates to Prague (execution layer) and Electra (consensus layer), promises to introduce several key improvements, including account abstraction (improved user experience), staking improvements and scalability.
“The market is underestimating the importance of the Pectra upgrade,” Ignas said. “Features like account abstraction, staking and scalability improvements could be game-changers for Ethereum adoption and usability.”
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While trading at $2,670 at the time of writing, VanEck’s base ETH price prediction of $11,800 by 2030 may seem bearish for some, Ignas pointed out, but that still represents a 4.4x increase — significantly more than the 2.2x Solana is projecting over the same period.
Ultimately, with a strong ecosystem, growing institutional support, and upcoming technical upgrades, the researcher notes that the bullish case for Ethereum looks increasingly compelling, even as the asset faces near-term headwinds.
Featured image of DALL-E, chart from TradingView.com
