A few days ago, I saw some friends in the group discussing the issue of ETH. Judging from the price, SOL's performance in this bull market is obviously better than ETH. Is ETH really in trouble?
Then I also responded with my own temporary plan, and I said: If Ethereum falls to around 2150, then I might consider buying a little bit of spot and try to make a small wave.
Although I mentioned in my previous article that I rarely do swing trading, the reason I said it above is actually just to simply express my attitude from a different perspective. I am optimistic about Ethereum.
As for the operation of the band, the most ideal is definitely to buy at the lowest point and then sell at the highest point, but this is difficult to do, so as long as you reach your expected position to buy, and then sell after achieving the corresponding goal. While hoping to make money by doing the band, you must also consider the possibility of losing money. The take-profit and stop-loss positions need to be customized according to your own risk preferences.
1. What happened to Ethereum this year?
As expected, this year's bull market should have been a brilliant year for Ethereum. In fact, many noteworthy events have occurred in Ethereum this year, such as the completion and implementation of the Cancun upgrade in March, the SEC's conclusion of its investigation into Ethereum 2.0 in June (but pledge has not yet been clarified), and the official approval of the Ethereum spot ETF in July.
In addition, we can also find through on-chain data that since the beginning of this year, the Ethereum on-chain activity has almost quadrupled, as shown in the figure below.
But it always gives people a feeling: Ethereum's performance in all aspects this year seems to be good, except that its price performance is relatively poor.
From the beginning of this year to now, if we compare the price at the beginning of the year with the price as of the time of writing this article, ETH has only increased by 14%, while BTC has increased by 45% and SOL has increased by 59%.
If we look at the ETH/BTC ratio, it seems that this comparison will be more intuitive. The current value of the ratio is around 0.043, which is almost the lowest point in the past year. As shown in the figure below.
If we continue to look at the SOL/ETH ratio, it seems to be the same, and even yesterday (August 8) this value hit a new all-time high of 0.064. As shown in the figure below.
Of course, there are other factors that have recently accompanied the Ethereum price issue. In addition to the impact of the macro market environment, there are also: a large-scale sell-off from Jump Trading, a group of wallets that have been dormant for more than three years are transferring a large amount of ETH (nearly 800,000 ETH, which is rumored to be the wallet address left by plustoken back then)...
In short, judging from the price performance, ETH’s performance this year has indeed not satisfied everyone.
2. So is ETH really doomed?
From a long-term perspective, in the above article and in Hualihuawai’s previous series of articles on the topic of Ethereum, our view is that we are optimistic about the long-term development of Ethereum.
From a short-term perspective, Ethereum may indeed face some problems. Today we will continue to talk about a possible point: ETH’s correlation demand is decreasing.
Compared to last year, the cost of transactions on L2 networks such as Arbitrum has become much lower this year, as shown in the figure below.
In a way, this seems to have had some impact on the price of ETH (liquidity split). If a network is faster and cheaper, but there is insufficient new demand and innovation, then the Gas token will seem to lose some reasons to rise.
It is precisely because of the decrease in demand for ETH that the inflation of ETH, which was originally in a deflationary state, has now become positive, as shown in the figure below.
To make a simple analogy, if we compare ETH to oil, because everyone used to need to refuel, and new cars (new concepts) were continuously launched, the price of oil would be more expensive. But with the large-scale popularization of L2, L2 is like a cheaper electric car. Now that everyone drives electric cars, the price of oil may be affected.
Of course, it is not ruled out that some people are still willing to drive gasoline cars because they think that gasoline cars are more stable and safer. We will not debate this here. Here we are just talking from the perspective of demand. If the relevant demand for a network's Gas token continues to decline, then its price will inevitably decline.
In the process, other networks were also given some new short-term hype opportunities. For example, Solana, which claims to be faster and cheaper, has made SOL tokens a new demand thanks to the hype of MemeCoin. The diversion of ETH to L2 and SOL has caused liquidity fragmentation to a certain extent.
In short, if a network reduces its fees by 10 times, then the corresponding demand needs to increase by 10 times to make up for this balance. Once this demand flows to other places (such as Solana, etc.), the corresponding network token price may experience some downward pressure.
In the long run, does this field really need hundreds of different networks? Or will one or a few be enough in the future? This needs to be left to time to choose. Anyway, at least in my opinion, in terms of application layer network construction, one Ethereum will basically be enough in the future, or a few more will also be acceptable (such as 2-3 heads of L2, 1-2 heads of L1), just like Windows and Mac currently occupy most of the market share, we don’t need to have hundreds of computer operating systems at the same time.
From this perspective, if your goal is short-term, then ETH's performance is indeed not as good as SOL. Moreover, although Solana is currently mainly hyped up by MemeCoin, it is possible that popular tracks such as AI, GameFi, and DePin will also be hyped up in the future. But only children make choices, and adults only look at benefits. If you are struggling to decide whether to buy ETH or SOL, then just buy some of both.
If you are looking at the problem from a longer-term perspective, then I would recommend focusing on the layout of ETH, as the overall ecological development of Ethereum is more robust. Moreover, at present, more than 28% of ETH tokens are already staked (as of the time of writing this article, 33,650,436 ETH are staked). In addition to the macro market environment, we still need to focus on the outflow/inflow data of ETF funds, which will also become one of the most important factors affecting the price trend of ETH. Once more funds (liquidity) begin to flow back into Ethereum, it will inevitably further promote the ecological development on Ethereum (DeFi ecology, L2-related ecology, etc.), thereby further increasing the relevance demand for ETH tokens. Therefore, now is still one of your opportunities to buy ETH.
Of course, whether you buy ETH or SOL, or any other currency, the price trend is bound to fluctuate. It does not mean that you can make money immediately if you buy it now. If you cannot accept any price fluctuations, it is recommended not to participate in any transactions. As mentioned in the previous article of Hualihuawai (August 7): We should not easily play a game that we cannot afford to play.
