1. Ethereum has underperformed the broader crypto market
This year, Ethereum has significantly lagged behind its peers. Bitcoin has surged almost 110%, and Solana has more than doubled, climbing about 120%. Meanwhile, Ethereum is up just 45% year to date -- and as recently as October, it had risen just a mere 5% in 2024.
This relative underperformance, however, is precisely what makes Ethereum so compelling now. With its price still 30% below its all-time high, Ethereum offers substantial upside potential. If momentum continues and the market dynamics align, Ethereum could break through its previous highs, offering attractive returns for investors willing to give Ethereum another chance.
2. Ethereum's struggles stem from predictable market dynamics
Ethereum's underwhelming performance isn't without reason, but the factors behind it may actually signal future strength.
First, this underperformance is not unusual. Historically, Ethereum and other altcoins tend to bleed value relative to Bitcoin during years when Bitcoin undergoes a halving. The reduction in Bitcoin's inflation rate during these cycles often draws disproportionate attention and capital.
Second, Ethereum's recent struggles also stem from the growing adoption of Layer 2 (L2) scaling solutions like Arbitrum, Optimism, and Base. While these L2s rely on Ethereum's blockchain for security, they bypass some usage fees by bundling multiple transactions into a single "blob" published on Ethereum's network. This has resulted in reduced fees paid to the Ethereum network, cutting the amount of Ether coins burned -- a mechanism crucial for maintaining a deflationary supply dynamic.#BinanceHODLerTHE
