- Ethereum has lost 24% of its value in the past week, underperforming compared to other major cryptocurrencies.
- Analyst Duo Nine suggests Ethereum’s approach to scalability might be diminishing its token’s value and demand.
Among the top 10 largest cryptos by market cap, Ethereum [ETH] was the worst performer at press time, with the asset losing approximately 24% from its value over the past week compared to its counterparts.
This decline has even extended to the asset’s past day performance which showed a drop of 3.9%.
Analyzing Ethereum’s decline
Duo Nine, a respected figure in the cryptocurrency analysis sphere, has raised alarms about Ethereum’s current trajectory, suggesting that the platform could be “slowly dying.”
According to Duo Nine, Ethereum’s underperformance, especially when compared to Bitcoin and Solana, raises critical questions about its future viability.
“When both Bitcoin and Solana outperform Ethereum, you got to ask yourself some serious questions,” Duo Nine commented, pointing to a disconcerting trend among Ethereum maximalists and developers who appear to be losing faith in the asset’s potential.
The analyst attributes part of Ethereum’s struggles to what he terms the “XLM curse”—a situation where the efficiency and cost-effectiveness of a network do not translate into increased token value.
He explained,
“If your network is fast & cheap, there is no reason for your token to pump,”
The introduction of Layer 2 solutions like Arbitrum has drastically reduced transaction costs, which, while beneficial from a technical standpoint, might not bode well for ETH’s market price.
The reduced need for ETH as a gas token could diminish its relevance and value.
Furthermore, Duo Nine criticizes Ethereum’s economic model, which now sees an inflationary token supply, purportedly to cover operational costs not met by transaction fees alone.
Source: Duo Nine on X
This, he argues, adds downward pressure on ETH’s price.
“Demand for ETH is so low that they have to literally print tokens from thin air again,” he states, pointing to a positive inflation rate as a bearish signal for the asset.
He added,
“Why is this happening? Because Vitalik decided to scale ETH via L2s and made it extremely cheap in terms of fees. But there is a problem. You see, ETH is like oil, and now everyone is moving to an electric car. What’s the point of Ethereum then? As a network it will do just fine and thrive, but if they scale away from ETH as a gas token, its price will crash.”
The competitive pressure from Solana and numerous other altcoins further complicates Ethereum’s position.
The expert questions whether the massive reduction in fees was a strategic error, as maintaining demand sufficient to support the reduced fees is challenging and could ultimately place downward pressure on Ethereum’s price.
What does fundamentals suggest?
In the broader market, Ethereum’s metrics provide a mixed picture.
Source: Glassnode
The number of active addresses has fluctuated significantly. After seeing a surge to more than 455k addresses late last month, it experienced a higher surge to 467k on 3rd August, but it has now retraced down to 429k marking a slight increase from the 400k seen on 5th August.
Such volatility in user engagement suggests that while the network remains active, user confidence could be waning.
Source: Coinglass
Read Ethereum’s [ETH] Price Prediction 2024-25
On the financial side, Ethereum’s open interest, which represents the total outstanding derivative contracts, like futures and options that have not been settled, fell by 3.60% in just one day.
Conversely, the open interest volume, indicating the total value of these contracts, saw a rise of 3.96%, suggesting a complex interplay of investment behaviors.
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