Chainfeeds Briefing:

Ethereum's weakness indicates a healthy market that still focuses on fundamentals. Chinese version compiled and published by Odaily.

Article Source:

https://www.odaily.news/post/5202487

Article Author:

Grayscale

Perspective:

Grayscale: Similar to Linux, Python, and a few other examples, Ethereum is considered one of the most important open-source software projects in history. Despite being less than 10 years old, the Ethereum network now consists of over 11,000 nodes, processes 35-40 million transactions monthly, can obtain around $46 billion in value, and is supported by over 2,100 full-time developers. The broader Ethereum ecosystem, composed of interconnected blockchains, now processes approximately 400 million transactions monthly. Although it holds a prominent position in the crypto industry and launched a spot-based exchange-traded product (ETP) last year, ETH's market cap significantly lags behind BTC. In fact, the ETH/BTC exchange rate has dropped to levels from mid-2020. From a market cap perspective, since the end of 2022, ETH's market cap has grown by about $90 million, while BTC's has grown by approximately $1.35 trillion (about 15 times). ETH's recent performance has also lagged behind some other smart contract platform tokens, such as Solana and Sui. Grayscale Research believes that smart contract-based application development will accelerate in the next 1-2 years, partly due to regulatory changes and upcoming legislation in the United States. The Trump administration has already modified federal crypto policy, allowing the industry to invest and thrive in the US. Additionally, a bipartisan group of senators has proposed the Guiding and Establishing National Innovation for Stablecoins (GENIUS) Act, which builds on previous congressional efforts to provide a comprehensive regulatory framework for stablecoin issuance. More explicit regulation should help increase investment and adoption of blockchain-based applications, thereby increasing on-chain activity (such as transactions and fees), and ultimately driving value accumulation for smart contract platform tokens. Beyond its first-mover advantage, Ethereum now faces competition from other smart contract platforms. However, Ethereum still maintains unique differentiators, particularly valuable for financial use cases, including substantial on-chain capital and a culture that emphasizes decentralization and neutrality. Therefore, we expect Ethereum to capture a significant portion of future on-chain activity, which in turn will drive ETH's appreciation. In the previous crypto bull market, BTC and ETH appreciated almost synchronously, and in 2021, ETH even appreciated faster, ultimately peaking in November 2021 with a price return approximately twice that of Bitcoin. However, Grayscale Research believes that ETH's poor performance precisely indicates that the crypto market is still focusing on fundamentals, which is a healthy signal. Within Grayscale's analytical framework, the Crypto market primarily distinguishes smart contract platform value based on fees. Although fees do not translate directly into token value accumulation across blockchains, they are typically passed on to token holders, and fees can be considered the most directly comparable measure of blockchain activity. In the smart contract platform space, both Ethereum and Solana have relatively high fees and market caps. Since the end of 2023, Solana has increased its fee income and market share in the smart contract platform sector, while Ethereum has lost its primary position in fee income and market cap. In other words, the market has appropriately repriced the relative value of Ethereum and Solana due to changes in fundamentals. As shown in the following diagram, Solana moves upward and to the right, while Ethereum moves downward and to the left, and today's valuation may be higher than its fee income.