Ethereum may be the worst-performing project of this bull market so far. Throughout the bull run, ETH and its related assets seemed to lag far behind competitors like Solana. As a result, market sentiment and narrative have also shifted away from Ethereum and towards other competing platforms.
Moving area supplement: Ethereum dropped as low as $3,153 at around 10 o'clock this morning (25), falling below the 3,200 level.
However, the unexpected approval of a spot Ethereum ETF could signal an imminent change in fortunes for the second-largest crypto asset. This is exactly what I want to explore today. Why has Ethereum performed so poorly during this bull market, and can ETFs be enough to turn things around?
Disclaimer: As always, this content should not be considered investment advice, nor is it a recommendation or recommendation to purchase ETH or other cryptoassets. Keep in mind that if you choose to invest in cryptocurrencies, it is very risky and you may lose all the money you invest. Having said that, let’s start the discussion.
1. Why are there so many difficulties?
1) Exceeding expectations in a bear market
Price and narrative are deeply intertwined and highly reflective. Price action drives narrative, and narrative drives price action.
When asset prices change, people like to attribute the change to a specific cause or narrative. This narrative can attract additional capital to amplify this change. Under the right circumstances, this can create a nice flywheel effect. Asset prices will continue to move in one direction, and the atmosphere surrounding the asset will increase.
Therefore, we need to look back to the bear market to understand the beginnings of Ethereum’s problems.
Ethereum performed relatively well throughout the bear market, outperforming the vast majority of crypto assets.
Crucially, it also bottomed earlier than most assets - hitting its lowest point during the Three Arrows crash, not during the FTX crash.
This means that in a bear market, ETH feels more momentum than most assets and the vibe around it is generally good. But there weren’t that many people to appreciate and buy into it, so the flywheel never started.
At the same time, relative outperformance in a bear market means that ETH is closer to its "fair" price than most other cryptoassets. As the market improves, it has less ground to recover and less room to execute. Again, Flywheel didn't execute because even if overall market sentiment improved, there wasn't enough price action to push it.
Contrast this with one of the more popular assets this cycle, Solana.
Solana was beaten pretty hard during the bear market. The association with FTX meant it was sold off heavily, creating a narrative that Solana was dead. Some projects have even abandoned the chain entirely, further deepening this sense of hopelessness.
All of this means that when entering a bull market, Solana will start from a very low position. SOL's price is so out of touch with fair value that it's able to rebound significantly as soon as market sentiment improves. This creates a sense of resurgence, supported by Solana's true believers launching new developments and rebuilding the ecosystem.
Therefore, narratives are easy to build, easy to believe, and easy to buy into. Many investors and traders do exactly this. They poured into Solana, pushing SOL higher.
For Solana, the flywheel was firmly in gear as soon as the bull market began, while Ethereum seemed to be stalling.
If ETH had performed worse during the bear market and thus had more room to recover, the atmosphere surrounding it might have been completely different even if the price ended up being roughly the same. However, it had the wrong price action at the wrong time.
As a result, Ethereum was unable to capture any momentum or attract attention at the start of the bull run, relegating it to an obscure role in a fickle and forgetful market. A brief and fairly understandable period of poor performance is enough for bad emotions to begin to creep in, leading to a feeling of malaise.
2) Narrative Dilemma
Even worse, from an Ethereum perspective, the assets that experience the greatest flywheel effects early in a bull market are the worst. Ethereum has always been in a slightly strange position in the market, having struggled to position itself correctly:
On the one hand, it is a smart contract platform and therefore an application of the technology ostensibly competing with other platforms such as Solana or Avalanche. On the other hand, it has a strong focus on robustness, reliability, decentralization and creating a strong and reliable currency. This puts it firmly in competition with Bitcoin.
This also creates a sense of conflict in Ethereum’s design as it strives to combine these competing goals.
It must be relatively conservative to meet its Bitcoin-like needs. This prevents it from adopting aggressive, high-throughput/low-fee designs like many other smart contract platforms. However, it will never be as simple or conservative as Bitcoin itself. Ethereum has to fight on two fronts and has one hand tied, so it is already at a disadvantage.
Then, as the bull market began, Bitcoin and Solana performed best and received the most attention. They have taken control of the narrative and squeezed Ethereum from two sides.
The idea of Solana’s resurgence has led to the idea that it could steal Ethereum’s thunder as the leading smart contract platform. Its low cost and initially great user experience make it seem like the future.
Why build or use on Ethereum if people can do the same thing in an environment that is faster, cheaper, simpler - and overall better? Especially when most people don’t care about “moneyness” and decentralization as much as Ethereum users and Bitcoin users do.
Bitcoin, meanwhile, benefits from ETFs and its thriving ecosystem, which includes Ordinals, fungible tokens and native L2.
The ETF narrative creates a sense that Bitcoin is the only serious crypto asset that institutions can support. With billions of dollars pouring into newly launched funds, the "digital gold" thesis finally appears to be paying off.
Meanwhile, the development of Ordinals proves that Bitcoin can be used as more than just currency. Like Ethereum, it may also be the basis for more complex calculations and transactions.
If Bitcoin can do this under more conservative and economically sound circumstances, what’s the point of Ethereum? Surely anyone who truly cares about decentralization and robust, reliable blockchain design will turn to Bitcoin.
If that wasn’t bad enough, Ethereum is taking a hit even in its relatively new “modularity” narrative.
Ethereum was meant to be the base layer for a broadly interconnected chain and high-level extension suite solutions. But that wasn't its original plan, and it's gradually moving in that direction, one upgrade at a time.
Then, Celestia came online, a new mod chain built specifically to fulfill the role that Ethereum will eventually assume. And, like Bitcoin and Solana, its financial and narrative performance during the early stages of the bull market was outstanding. Ethereum is once again somewhat irrelevant.
Nearly every Ethereum narrative has been weakened simultaneously, adding to the ongoing negative sentiment surrounding its own mediocre price action.
All the excitement and attention went elsewhere, and Ethereum was left as a meaningless relic of the past.
In my opinion, this narrative attack is the main reason why everyone has been so negative about Ethereum so far. Its very existence, its raison d'être, is called into question. And without a surge in activity or price, it can't give a convincing answer.
3) Lack of buyers
Another factor in Ethereum’s lackluster price action (and the negative sentiment that comes with it) is the lack of buyers to support the price. Again, this is a case of Ethereum’s previous strong performance coming back to haunt it.
In the last cycle, Ethereum was the consensus choice. For anyone who is serious about cryptocurrencies, ETH is pretty much the default asset.
Bitcoin, once the consensus choice, is starting to look a bit old and out of touch. Compared to other crypto assets, it is often viewed as a tired pet stone with relatively little growth potential.
Meanwhile, ETH is at the center of an ecosystem of rapidly expanding suites hailed as the “future of finance.” While there are other platforms like Solana with greater growth potential, only Ethereum comes close to matching Bitcoin’s sustainability and reliability. From a risk/reward perspective, ETH is the clear best choice.
There was a time when Ethereum’s often contradictory narratives seemed to synergize, making it a perfect choice for anyone bullish on the cryptocurrency. You know it won't let you down or have fundamental problems, but it's still exciting and rewarding.
At the time, this was excellent for ETH - and may have contributed to its extraordinary performance in the bear market. But fast forward to today, and this has become a problem.
Almost every cryptocurrency investor who has participated in more than one cycle already holds ETH. And if they don’t already own ETH, it’s likely because they have a clear reason not to – usually due to irreconcilable philosophical differences.
In other words, most people in the cryptocurrency space either already own ETH or never will.
As the bull market begins, those who already hold ETH have no reason to buy more. Why should they prioritize assets they already hold when so many undervalued assets look so attractive?
If anything, existing holders are likely to sell some of the ETH they own in exchange for assets with better short-term prospects, leading to even worse price action.
Lacking support from crypto natives, ETH needs crypto tourists and newcomers to step in. But the market did not flood with new capital as many expected. In fact, we are still waiting for general interest in cryptocurrencies to pick up and the next wave of users and investors to arrive.
Without them, ETH would understandably struggle with a lack of buyers.
To perform better, ETH needs to give existing holders a reason to increase allocations, or find entirely new buyers... Keep this in mind, we'll come back to this topic later.
4) Asset dilution
To make matters worse, the small amount of money that entered the Ethereum ecosystem was spread across multiple assets.
This is because there are now a large number of Ethereum-related assets that can be considered "ETH beta" - alternatives that should outperform ETH itself in a bull market environment.
Therefore, anyone who is bullish on Ethereum must decide the best and most profitable way to express that view.
For example, investors can choose Layer2Tokens such as OP and ARB. Alternatively, they might consider staking-related tokens such as LDO. Or Tokens from the Ethereum DeFi, NFT or RWA ecosystem, such as UNI, BLUR or ONDO. Maybe they would even like an Ethereum-based meme coin like PEPE or MOG.
There are so many different avenues to choose from, so many different assets to consider if you are bullish on ETH.
Even if you want to keep it simple and only hold ETH, you still need to decide whether to hold native ETH, Liquid Staking ETH, or Liquid Restaking ETH.
All of this can create decision fatigue that may put some investors off.
Worse, it causes any money that comes in to be spread across a variety of assets, reducing the stimulating effect that cash could bring.
Ethereum is not the only one affected by this. After all, investors may have to consider the pros and cons of buying SOL versus buying BONK, WIF, or PYTH. But the ecosystem around Ethereum is more developed and has more options, so the dilution effect is more significant. This obviously doesn’t help when Ethereum is already at a disadvantage.
5) Security issues
To make matters worse, there are concerns that ETH will be deemed a security by the U.S. Securities and Exchange Commission (SEC).
I'm sure you've heard about the investigation into the Ethereum Foundation and concerns about PoS turning ETH into a security. These fears will undoubtedly weigh on ETH and hinder its performance.
This goes against years of conventional wisdom that ETH is a commodity and therefore immune to SEC attacks. Now the market has to consider and price in worst-case scenarios, such as Ethereum being delisted from major trading platforms.
Furthermore, this threatens Ethereum’s appeal to institutional investors. After all, they probably don't want to invest in something with so much uncertainty. And even if they could get it without the ETF wrapper, they might not want to.
You see, once the Bitcoin ETF was approved, people automatically assumed that the ETH ETF would follow. It may take another lawsuit to force the SEC to take action, so it could take a year or more to get there, but it looks pretty certain. This gives ETH a glimmer of light at the end of a long tunnel.
But safety concerns have all but dashed those hopes. The gloomy and pessimistic atmosphere on Ethereum just got darker.
It feels like Gary Gensler and the SEC are cracking down on something that's already at its lowest point.
6) Marketing issues
The last thing I want to mention is that Ethereans seem to be having trouble getting the word out about Ethereum. There are two aspects to this:
First, many Ethereans have moved from Twitter to Farcaster over the past year or so. Even if they don't shift completely, their time on Twitter is significantly reduced.
However, Twitter remains the focal point for much of crypto culture. Without Ethereans to defend and inform Ethereum, we end up experiencing a slightly distorted version of reality, shaped and dominated by Ethereum’s opponents. Negative news appears more frequently than positive news, which both fuels and exaggerates the pessimism surrounding Ethereum.
The second is about Ethereum’s research-focused mentality, which offends some people.
When Ethereans discuss things on Twitter or other social media, their conversations are often incomprehensible and full of jargon. This alienates and may even irritate potential users.
For example, users may complain about the understandable problem of high transaction fees making small transactions impossible. But then famous Ethereans were seen using incomprehensible and slightly ridiculous terms like "Proto-Danksharding." This makes them feel like their issues are not being taken seriously.
Now, I don't want to be too critical here. Ethereum – and blockchain in general – is very complex and involves a lot of difficult technology that the average user can’t understand.
But again, if Ethereans continue like this, they will never win the narrative war. While this may be difficult, they need to find better ways to acknowledge common user complaints while explaining in simple terms why certain design decisions were made and what is being done to help solve the problem.
To be honest, it's probably impossible. Most people don't want to understand why things are the way they are, or they don't have the time to learn. Instead, they will view Ethereum as clunky and expensive because it uses old, outdated technology. And they will think that famous Ethereans don't care at all because they are rich and out of touch with ordinary people.
In the long run, this may not be a big problem. If Ethereum's theory is correct, eventually people will use low-fee L2 without caring. They may not even know they are using L2, let alone L2 within the Ethereum ecosystem.
But until all difficulties are abstracted away, users will notice Ethereum’s shortcomings and complain about them. And these complaints will continue to fuel the negative atmosphere surrounding Ethereum, making Ethereans appear out of touch. Unless Ethereans can streamline their message enough to cut through the noise and explain their methods in a clear, comprehensible and comprehensible way.
2. Will ETFs change the situation?
All of these factors have combined to contribute to ETH’s underperformance and the lackluster sentiment surrounding Ethereum over the past few months.
So the question now is, can ETFs help change that? I think so. Or, at least, it should change things as long as broader circumstances and overall trends don't interfere.
This is because the approval of an ETF would address many of the reasons for Ethereum’s underperformance.
1) Security problem solving
First, the approval of the ETF removes much of the worry and uncertainty about whether Ethereum will be deemed a security.
While it is still possible that the SEC will take some action against pledged ETH, the impact of this scenario would not be as severe as if ETH itself were deemed a security. Therefore, the financial negative impact is much smaller.
And even that threat now looks relatively unlikely.
The approval of the ETF appears to be a political move by Democrats, who are trying to gain a favorable position for themselves ahead of the election.
If they truly hope to appeal to crypto voters — or at least not scare them — then pursuing something as aggressive as attacking the second-largest crypto asset would clearly be unwise.
As a result, Ethereum is suddenly off the hook and the main argument for avoiding investing in ETH is overturned.
2) Attract new buyers
An ETF would also help solve the lack of buyers for Ethereum.
Not only will it introduce Ethereum to a whole new and extremely wealthy group of institutional investors, it will also give crypto natives a reason to buy ETH again.
Many cryptocurrency natives may be caught off guard by the approval of an ETF. They may sell ETH early in a bull market and invest in more attractive and better-performing assets. But now they are under-positioned and will want to make adjustments.
In the meantime, traders and short-term investors will likely flock back to ETH in an attempt to preemptively buy and anticipate the ETF launch.
Then, once the ETF comes online, traditional financial funds will dominate the price trend.
I don't expect these funds to perform as well as the Bitcoin ETF, but I think their impact on ETH price and performance should be relatively similar on a market scale.
In the long term, ETFs open the door for massive wealth flows into ETH and the Ethereum ecosystem. In short, the ETF should attract new buyers and capital flows into Ethereum in the short and long term, which is exactly what ETH needs to start rising again.
3) Reset the narrative
We have seen that price action and narrative are closely linked.
If the ETF excitement and runaway behavior does lead to ETH outperforming other assets in the short term, that could be enough to start the narrative flywheel.
At the very least, positive price action will reduce concerns about competitors such as Solana and Bitcoin encroaching on the Ethereum space. Although the impact of price movements on public opinion is somewhat absurd, it is indeed a common phenomenon.
But the biggest narrative benefit from ETF approval is that it serves as a reminder of how unique and special Ethereum is compared to other “Altcoin.”
Ultimately, only two crypto assets are considered reliable and respected enough to have an ETF in the near future. This shows that, aside from Bitcoin, Ethereum is the only institution-friendly crypto asset.
Unlike Bitcoin, which continues to be positioned as digital gold, Ethereum is associated with technical crypto. Therefore, anyone in the traditional financial world who wants exposure to the most dynamic and high-potential areas of the crypto industry must buy ETH.
We’re once again seeing that time-tested blend of reliability and excitement — the same blend that previously made ETH the default asset for crypto natives. Safe enough to invest in but still provide great returns.
With the right marketing, Ethereum might even become more popular than Bitcoin among traditional investors.
Bitcoin already has a huge first-mover advantage and better brand recognition in the market, but its story is also relatively flat.
Most people don’t particularly care about gold, so they probably don’t care about digital gold either. But many people like technology investments that grow quickly and generate real returns — which sounds more like Ethereum.
Still, traditional finance folks may already view Bitcoin as an exotic asset with high risk and potential, so they may be reluctant to dip further down the risk curve — even if the rewards may be slightly higher.
Therefore, I think the chances of ETH returning to being the default asset are relatively low - at least in the short term. But given enough time and clear information, it's not unthinkable.
Even if this never happens, the launch of the ETF will be a significant moment — almost a reset point — for Ethereum and its narrative.
At the very least, this differentiates Ethereum from other smart contract platforms and provides some breathing room after the ongoing onslaught of Solana. It should help ETH rise alongside Bitcoin and Solana rather than being swallowed up by them. After a long period of erosion by competitors, I think many Ethereum supporters will view this as a victory.
4) Professional marketing
The launch of an ETF may even help Ethereum solve its marketing problems.
Once an ETF goes live, ETF issuers will be responsible for promoting their products to potential customers. This means they need to start explaining what Ethereum is in simple terms – avoiding technical jargon and overly complex terminology.
While this may be a bit too late for crypto natives, it should mean traditional finance folks have a slightly better introduction to Ethereum. Who knows, maybe some Ethereum supporters will absorb some of the marketing jargon to improve their own promotion efforts.
5) Reduce dilution
ETFs should also help mitigate dilution issues.
Of course, crypto natives will still allocate funds into various Ethereum-related assets in hopes of maximizing returns.
However, the ETF itself will be limited to plain ETH. All inflows will be concentrated on Ethereum. Depending on how successful the issuance is, this could mean a massive influx of money into a single asset — which could offset the dilutive effect among crypto natives.
3. But are there risks?
Judging from these analyses, an ETF would address nearly all of the issues leading to Ethereum’s underperformance and negative outlook.
Some improvements may take time to take effect - especially things like marketing changes and the introduction of new institutional investors - but we should start to feel the benefits within the next 12 to 18 months.
If this is the case, then it’s reasonable to think that the ETF will wake up Ethereum, drive prices higher, and bring a more positive attitude to the space.
But of course, there's no guarantee everything will go smoothly. There are many risks that could lead to failure, and Ethereum could continue to slump.
Today, people are more likely to believe negative news about Ethereum. This is often the case when negative emotions persist for such a long time. As such, Ethereum is particularly vulnerable to any negative surprises or price stagnation when these funds launch. After all, this would confirm everyone’s existing bias that Ethereum is past its time and that Ethereum is on its way out.
In a worst-case scenario, this negativity could even spread from crypto Twitter to the wider world, leading to weaker demand for the ETF. I don't necessarily expect this to happen, but people are not always rational and emotions can play a big role in investment decisions - even by the so-called "smart money."
Obvious short-term risks include far lower than expected ETF inflows or higher than expected Grayscale outflows. In either case, Ethereum is likely to be affected considerably.
The biggest problem in the long term is Ethereum's failure to establish itself as an interesting or worthy investment asset in the traditional financial world. They seem to have some interest in Bitcoin, so we all assume they'll like Ethereum as well, but we don't really know that yet.
Clearly, there's far less enthusiasm for the Ethereum ETF than there is for the Bitcoin ETF - although that's to be expected. But if Ethereum fails to drum up interest or generate any excitement after debuting on the mainstream stage and rolling out marketing materials, it could be in trouble.
4. Does this really matter?
The last question worth thinking about is: "Does this really matter?"
So what if ETH’s price performs poorly? The way Ethereum operates will not change due to price fluctuations in ETH. Whether ETH is worth $10 or $10,000, the functionality of the network is the same - although the security may be different.
Additionally, this is all very focused on the short term, whereas Ethereum is focused on sustainability and long-term goals.
Price action, market sentiment, and narrative are essentially noise in Ethereum’s day-to-day execution. They will not have a huge impact on Ethereum’s execution.
However, my reasons for writing this are not so superficial. After all, I don't usually focus on short-term price movements.
The reason I think these questions are important is that the narrative and market sentiment surrounding protocols like Ethereum will impact its future success. What may seem like inconsequential noise today may eventually form patterns and set trends.
No one wants to develop on a chain that is considered to be in decline. No one wants to use that chain either - especially when there don't seem to be enough developers to create exciting new opportunities.
This situation won't happen overnight, but if Ethereum can't start to improve its performance -- if it can't change the narrative and start to gain some momentum -- then it will shift more and more activity to its competitors.
Its powerful network effects, considered almost invincible today, will gradually be eroded.
The threat is not immediate and the risk is relatively low - at least for now.
Contrary to popular belief, Ethereum remains ahead of its competitors on almost every meaningful metric. ETH has become the only alternative coin with an ETF, indicating that it is ahead of its competitors in some aspects. It may be years before platforms like Solana have similar mainstream financial products.
But Ethereum cannot be complacent, and it cannot squander its lead. Especially when the crypto industry is so new and set to grow significantly in the coming years. Things may - and likely will - change faster than many expect.
Ethereum’s first-mover advantage, network effects, and long-term philosophy mean it has a good chance of becoming the dominant crypto platform for the foreseeable future.
But success is by no means a given. No matter what it does, Ethereum cannot allow negative sentiment to persist for much longer. The upcoming ETF offering may be the best opportunity to counteract these negative sentiments.
