According to The Block, Bitwise chief investment officer Matt Hougan said in a memo to clients on Tuesday that "no one likes Ethereum" in the current market, as the ETH/BTC exchange rate recently fell below a three-year low. However, Matt Hougan believes this instead provides a potential contrarian investment opportunity at the end of the year.
No one likes Ethereum
Although the overall cryptocurrency market has underperformed over the past six months, Bitcoin is still up 42% in 2024 and Solana is up 27%, compared with Ethereum's gain of just 1%. Matt Hougan said that the mood of the Ethereum community is very depressed, and the main issues causing this situation include: the risk of the US election, increased competition from Solana, token economic challenges, and the poor performance of spot ETFs.
Although the U.S. approved an Ethereum spot ETF in July, Matt Hougan noted that the U.S. Securities and Exchange Commission (SEC) still appears to consider collateralized Ether as a security. If Harris wins the November election and continues the Biden administration’s skepticism toward cryptocurrencies, Hougan believes Ethereum may continue to face regulatory challenges.
Additionally, Ethereum spot ETFs have also underperformed expectations, including Bitwise’s ETHW fund. Newly launched funds attracted $2.1 billion in net inflows, but Grayscale's ETF (ETHE) saw $2.8 billion in net outflows, overall still outflows.
Matt Hougan also pointed out that the rise of emerging public chains such as Solana has made competition more intense:
“In the cryptocurrency community today, bullish sentiment towards new chains such as Solana is very popular, while bearish sentiment towards Ethereum is gradually increasing due to the older technology and higher costs.”
Finally, Matt Hougan emphasized that Ethereum is focused on driving the growth of transaction volume on the Layer 2 network, which has led to the revenue of the underlying chain falling to its lowest level in four years. Many people have also begun to question whether Ethereum has failed due to excessive promotion of Layer 2 expansion. It harms the development of its underlying Layer 1.
Counter-trend investment opportunities
While these challenges have impacted market sentiment and prices, Hougan believes they miss an important point.
“It’s cool to hate Ethereum now. I bet it will look stupid in the end.”
Although both Ethereum and Solana are trying to become the "public computer" of decentralized applications, those applications that have truly achieved "breakthrough success" are almost all dominated by Ethereum, which has the largest number of active developers and users, with more than half of Stablecoins are issued on Ethereum, more than 60% of DeFi assets are locked on Ethereum, and Ethereum is also the preferred settlement layer of the prediction platform Polymarket. In addition, BlackRock’s on-chain U.S. debt fund with an asset management scale of more than $500 million and Nike’s NFT platform are also based on Ethereum. These achievements are difficult to ignore.
Matt Hougan said:
“Ethereum is like the Microsoft of blockchain. Everyone is talking about Google, Slack and Zoom, which makes sense because they bring transformative technology. But Microsoft is still bigger than the sum of them. "
Although he is not bearish on Solana or other emerging chains, Matt Hougan believes that too many people ignore the huge success that Ethereum has achieved.
“Ethereum’s challenges are not fatal, and its opportunities are full of potential. I believe that as we approach the November election and related regulatory policies become clearer, the market may re-evaluate Ethereum. From now on, Ethereum is "This looks like a potential contrarian investment opportunity before the end of the year," he concluded.
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