In a recent report, market researcher and analyst DeFi Ignas conducted a detailed analysis of the current bearish and bullish scenarios for leading altcoin Ethereum (ETH), providing valuable insights into the future direction of the cryptocurrency.
The reasons behind Ethereum’s poor performance
Over the past two years, Ethereum has struggled to keep up with its peers in the cryptocurrency space, falling 47% against Bitcoin (BTC) since the market trough in early 2023 and underperforming Solana (SOL) by 6.8 times.
Ignace pointed out that the reasons for this poor performance are controversial, but several key factors stand out. First, the narrative of "digital gold" around Bitcoin is easier for new retail investors and institutions to understand than the more complex story of Ethereum. Second, Solana's status continues to rise, and its number of active users, transaction volume, and market share are catching up with and sometimes surpassing Ethereum, which has put considerable pressure on the leading smart contract platform.
“Solana is higher risk in terms of smart contract adoption (lower market cap), while Ethereum is somewhere in between,” Ignas explained. “Ethereum’s modular approach to layer 2 solutions also leads to fragmented liquidity and a more complex user experience.”
Still, the researcher remains optimistic about Ethereum’s long-term potential and offers several compelling reasons to keep an eye on it.
Network Effects and Real World Use Cases
Efficient and deflationary network: If Ethereum’s gas price remains around 20 Gwei, the network will be considered deflationary and scalable, which is an attractive and efficient option for users.
Decentralization and Security: Ethereum’s decentralized nature and security have earned the trust of major institutions, including BlackRock, PayPal, JPMorgan Chase, and Santander, which are testing blockchain settlement and tokenization on the platform.
Mature DeFi ecosystem: Ignas believes that Ethereum and its layer 2 solutions have the “most mature decentralized finance (DeFi) ecosystem” in the crypto space, with considerable total locked value (TVL) and transaction volume, attracting more users and pushing up gas fees and ETH destruction.
Network Effect: Ethereum’s first-mover advantage and lion’s share of developer minds drive its network effect, solidifying its position as the leading smart contract platform.
Tokenization of real-world assets: Ethereum is becoming the preferred chain for tokenization of real-world assets (RWA), with 52% of stablecoins and 73% of US Treasuries currently tokenized on the platform.
An overlooked catalyst?
Another less discussed catalyst that could have a big impact is the upcoming Pectra upgrade, expected in the first quarter of 2025, the researchers said.
This upgrade combines updates to Prague (execution layer) and Electra (consensus layer), and is expected to introduce several key improvements covering account abstraction (optimizing user experience), staking improvements, and scalability.
“The market is underestimating the significance of the Pectra upgrade,” Ignas said. “Features like account abstraction, enhanced staking, and scalability improvements could be game-changers for Ethereum adoption and usability.” Ignas noted that ETH is trading at $2,670 as of this writing, and while VanEck’s 2030 base price forecast of $11,800 for ETH may seem pessimistic to some, it still represents a 4.4x increase — much higher than Solana’s 2.2x forecast for the same period.
Ultimately, the researchers stressed that with a solid ecosystem, growing institutional support, and upcoming technological upgrades, the bullish case for Ethereum looks increasingly compelling even if it faces headwinds in the short term.
