Ethereum (ETH) is facing challenges in the current cycle, as the fear (FUD) landscape peaks and investor attention is shifting to other assets.

According to Zaheer Ebtikar from crypto hedge fund Split Capital, ETH has fallen behind many other coins due to “middle child syndrome”*.

“ETH is suffering from middle child syndrome. The asset has fallen out of favor with institutional investors, lost support from private capital in the crypto space, and has not seen significant participation from large-scale retail investors,” he emphasized.

ETH Abandonment Trend

Among major cryptocurrencies, ETH has only returned 8% annually, far below the double-digit returns of Bitcoin and Solana. Ebtikar attributes this underperformance to investors focusing on BTC and other competitors like SOL and Sui.

There are three main sources of capital in the crypto space: institutional (via ETFs/futures), private (liquidity funds, VCs), and finally retail. However, only the first two are really important right now, he said.

Ebtikar noted that institutional capital is flowing into BTC primarily through ETFs. Notably, the ETH ETF has seen negative net inflows of $546 million since its launch in July, indicating low interest in the asset.

On the contrary, he argues that private capital is viewing ETH as an overvalued asset and is shifting to other competitors that are considered more attractive, such as SOL, Celestia, and SUI.

“ETH is too large for native capital* to support, while still being able to support other index assets like SOL and some major coins like TIA, TAO and SUI”.

Coinbase analysts also agreed with this assessment in their September report.

The SOLETH ratio, which tracks the value of SOL relative to ETH, has risen sharply since last year, reinforcing Ebtikar’s thesis that investors may be leaving ETH to seek opportunities in SOL.

However, Ebtikar also pointed out that ETH is the only altcoin approved for an ETF by the SEC, which opens up the possibility of renewed interest, especially from institutional investors, by 2025.

He predicts that demand from ETF investors will increase, along with changes in the Ethereum Foundation and political factors such as a Trump victory.

At the time of writing, ETH is priced at $2,449, and has been stable in the $2,300 to $2,500 range since early October.

*“Middle child syndrome” is a term used to describe the feelings and behaviors that can appear in children who are the middle child in the family, that is, those with the oldest and youngest siblings. These children often feel neglected or lack attention compared to their siblings.

*Native capital is generally understood as the natural or original capital that an asset or market can attract from within its own community or sector. In the context of cryptocurrency, it can refer to investment from industry investors, such as hedge funds, financial institutions, or individuals directly involved in the cryptocurrency sector. Simply put, native capital is money invested by people or organizations that already have an understanding and participation in that ecosystem, rather than capital from outside sources or from other industries.