Author: Joseph Harris

Translation: Plain Blockchain

Ethereum may be the worst-performing project in this round of bull market so far. Throughout the bull market, ETH and its related assets seem to be far behind competitors such as Solana. Therefore, market sentiment and narrative have shifted from Ethereum to other competing platforms.

However, the unexpected approval of the spot Ethereum ETF may herald a change in the fate of the second largest cryptocurrency. This is what I want to explore today.

Why has Ethereum performed so poorly in this bull market, and can the ETF be enough to turn the tide?

Disclaimer: As always, these contents should not be considered as investment advice, nor are they recommendations or endorsements to purchase ETH or other cryptocurrencies. Please remember that investing in cryptocurrencies is highly risky, and you may lose all your invested capital. With that said, let's start the discussion.

1. Why the Dilemma?

1) Performance Exceeding Expectations in Bear Market

Price and narrative are deeply intertwined and highly reflective. Price movements drive narratives, and narratives also drive price movements.

When asset prices change, people like to attribute these changes to specific reasons or narratives. This narrative can attract additional capital to amplify the change.

Under the right circumstances, this can create a good flywheel effect. Asset prices will continue to move in one direction, and the atmosphere surrounding the asset will also strengthen.

Therefore, we need to review the bear market to understand the beginning of Ethereum's problems.

Look, Ethereum performed relatively well throughout the bear market, surpassing the vast majority of cryptocurrencies.

Crucially, it also bottomed out earlier than most assets—hitting its lowest point during the Three Arrows Capital crash, rather than during the FTX crash.

This means that during the bear market, ETH felt more momentum compared to most assets, and the overall atmosphere surrounding it was positive. But there weren't as many people appreciating and buying into it at that time, so the flywheel never started.

At the same time, the relatively strong performance during the bear market means that ETH is closer to its "fair" price compared to most other cryptocurrencies. As the market improves, it needs less ground to recover and has less room to run. Once again, the flywheel didn't start because even with an overall improvement in market sentiment, there wasn't enough price movement to drive it.

Compare this to one of the more popular assets in this cycle, such as Solana.

Solana was heavily suppressed during the bear market. Its association with FTX meant that it was heavily sold off, creating a narrative that Solana was dead. Some projects even completely abandoned the chain, further deepening this sense of despair.

All of this means that entering the bull market, Solana started from a very low position. SOL's price was severely disconnected from its fair value, so when market sentiment turned positive, it was able to rebound significantly. This created a sense of revival and received support from true Solana believers to launch new developments and rebuild the ecosystem.

Therefore, narratives are easy to establish, easy to believe, and easy to buy into. Many investors and traders did just that. They poured into Solana, driving SOL higher and higher.

For Solana, the flywheel was firmly in motion from the beginning of the bull market, while Ethereum seemed to be stagnant.

If ETH had performed worse during the bear market, allowing for more room for recovery, then even if the price ended up roughly the same, the overall atmosphere surrounding it might have been completely different. But it had the wrong price movement at the wrong time.

As a result, Ethereum failed to seize any momentum or attract attention at the beginning of the bull market, becoming an inconspicuous player in this fickle and forgetful market. A brief and quite understandable underperformance was enough to let negative emotions start to spread, leading to a sense of despondency.

2) Narrative Dilemma

What's worse, from Ethereum's perspective, the assets that experienced the most significant flywheel effect at the beginning of the bull market were the worst. Ethereum has always been in a somewhat strange position in the market, making it difficult to position itself correctly:

On the one hand, it is a smart contract platform, so it appears to be competing with technical applications such as Solana or Avalanche.

On the other hand, it emphasizes robustness, reliability, decentralization, and creating a strong and reliable currency. This makes it firmly competitive with Bitcoin.

This also creates a sense of conflict in Ethereum's design, as it strives to combine these competitive goals.

It must be relatively conservative to meet its Bitcoin-like requirements. This prevents it from adopting the aggressive, high-throughput/low-fee designs of many other smart contract platforms. However, it will never be as simple or conservative as Bitcoin itself. Ethereum must fight on both fronts, with one hand tied behind its back, so it is already at a disadvantage.

Then, as the bull market began, Bitcoin and Solana performed the best and received the most attention. They dominated the narrative from both sides, squeezing Ethereum.

The idea of Solana's revival made people think it could steal the limelight from Ethereum as the leading smart contract platform. Its low fees and initial excellent user experience made it look like the future.

If people could accomplish the same things in a faster, cheaper, and simpler—overall better environment, why build or use on Ethereum? Especially when most people don't care about "monetary" and decentralization as much as Ethereum and Bitcoin users.

At the same time, Bitcoin benefited from ETFs and its thriving ecosystem, including NFTs, alternative tokens, and native L2.

The ETF narrative gave the feeling that Bitcoin is the only serious cryptocurrency asset that institutions can support. With billions of dollars pouring into newly launched funds, the "digital gold" argument finally seemed to pay off.

Meanwhile, the development of NFTs proved that Bitcoin can be used not only as a currency. Like Ethereum, it may also be the foundation for more complex computations and transactions.

If Bitcoin can do these things in a more conservative and economically sound manner, what's the point of Ethereum? Surely anyone who truly cares about decentralization and robust, reliable blockchain design would turn to Bitcoin.

If that's not bad enough, Ethereum has also been hit in its relatively new "modular" narrative.

Ethereum was supposed to be the foundation for a widely interconnected chain and high-level scaling solutions. But this was not its original plan, and it is gradually moving in that direction, one upgrade at a time.

Then, Celestia went live, a new modular chain built specifically to fulfill the role that Ethereum will eventually take on. And, like Bitcoin and Solana, it performed very well financially and narratively at the beginning of the bull market. Once again, Ethereum seemed somewhat irrelevant.

Almost every narrative of Ethereum has been weakened, exacerbating the sustained negative sentiment brought about by its mediocre price performance.

All the excitement and attention have shifted elsewhere, leaving Ethereum as a meaningless relic of the past.

In my view, this narrative attack is the main reason why Ethereum has been so negative to everyone so far. Its existence itself, the reasons for its existence, have been questioned. And without a surge in activity or price, it cannot provide a convincing answer.

3) Lack of Buyers

Another factor contributing to Ethereum's lackluster price performance (and the resulting negative sentiment) is the lack of buyers to support the price.

Again, this is a case where Ethereum's previous strong performance has turned into a problem for it.

In the previous cycle, Ethereum was the consensus choice. For anyone serious about cryptocurrencies, ETH was almost the default asset.

Bitcoin, once the consensus choice, began to seem somewhat outdated and out of touch. Compared to other cryptocurrencies, it was often seen as a played-out pet rock with relatively limited growth potential.

At the same time, ETH was at the center of a rapidly expanding ecosystem, hailed as the "future of finance." While there were other platforms with greater growth potential, only Ethereum came close to matching the persistence and reliability of Bitcoin. From a risk/reward perspective, ETH was the obvious best choice.

There was a time when Ethereum's often contradictory narratives seemed to work together to make it the perfect choice for anyone bullish on cryptocurrencies.

You knew it wouldn't disappoint or encounter fundamental problems, but it was still exciting and rewarding.

At that time, this was great for ETH—it may have even contributed to its exceptional performance during the bear market. But fast forward to today, and it has become a problem.

Almost all cryptocurrency investors who have participated in more than one cycle already hold ETH. And if they don't own ETH yet, it's likely because they have specific reasons not to—usually due to irreconcilable philosophical differences.

In other words, most people in the cryptocurrency space either already own ETH or never will.

With the start of the bull market, existing ETH holders have no reason to buy more. Why prioritize the assets they already hold when so many undervalued assets look so attractive?

If anything, existing holders are likely to sell some of their ETH to acquire assets with better short-term prospects, leading to even worse price performance.

Due to the lack of support from native cryptocurrency holders, ETH needs the intervention of cryptocurrency tourists and newcomers. But the market has not seen the influx of new capital as many expected. In fact, we are still waiting for a widespread resurgence of interest in cryptocurrencies and the arrival of the next wave of users and investors.

Without them, it's understandable that ETH struggles due to the lack of buyers.

To perform better, ETH needs to give existing holders a reason to increase their holdings or find entirely new buyers… Remember this, we will come back to this topic later.

4) Asset Dilution

What's worse is that a small amount of capital entering the Ethereum ecosystem is being spread across multiple assets.

This is because there are now a large number of Ethereum-related assets that can be seen as "ETH Beta"—alternatives that should outperform ETH itself in a bull market environment.

Therefore, anyone bullish on Ethereum must decide on the best and most profitable way to express this view.

For example, investors may choose Layer2Tokens such as OP and ARB. Or they may consider staking-related tokens such as LDO. Or tokens from the Ethereum DeFi, NFT, or RWA ecosystems, such as UNI, BLUR, or ONDO. Perhaps they may even like meme coins based on Ethereum, such as PEPE or MOG.

With so many different paths to choose from, if you are bullish on ETH, there are so many different assets to consider.

Even if you want to keep it simple and only hold ETH, you still need to decide whether to hold native ETH, Liquid Staking ETH, or Liquid Restaking ETH.

All of this leads to decision fatigue and may deter some investors.

What's worse is that it leads to the dispersion of incoming funds across various assets, reducing the stimulative effect that cash could bring.

Ethereum is not the only one affected by this. After all, investors may have to consider the pros and cons of buying SOL versus buying BONK, WIF, or PYTH. But with a more developed ecosystem surrounding Ethereum and more choices, the dilution effect is more significant. This is obviously not helpful when Ethereum is already at a disadvantage.

5) Security Concerns

To make matters worse, there are concerns that ETH will be classified as a security by the U.S. Securities and Exchange Commission (SEC).

You may have heard about the investigation into the Ethereum Foundation and concerns about PoS turning ETH into a security. These fears undoubtedly put pressure on ETH and hinder its performance.

This contradicts the traditional wisdom that ETH is a commodity and therefore not susceptible to SEC attacks. Now the market has to consider and factor in the worst-case scenario, such as Ethereum being delisted from major trading platforms.

Furthermore, this threatens Ethereum's appeal to institutional investors. After all, they may not want to invest in something with so much uncertainty. And even if they can get it without an ETF wrapper, they may not want to.

You see, once the Bitcoin ETF is approved, people automatically assume that an ETH ETF will follow. It may take another lawsuit to force the SEC to take action, so achieving this goal may take a year or longer, but it seems quite certain. This gives a glimmer of hope for ETH at the end of the long tunnel.

But security concerns have almost completely shattered these hopes. The gloomy and pessimistic atmosphere surrounding Ethereum has become even darker.

It feels like Gary Gensler and the SEC are suppressing something that is already at a low point.

6) Marketing Issues

Finally, I want to mention that Ethereans seem to be having difficulty promoting Ethereum. There are two aspects to this:

First, over the past year or so, many Ethereans have moved from Twitter to Farcaster. Even if they haven't completely switched, they have significantly reduced their time on Twitter.

However, Twitter is still the focus of most cryptocurrency culture. With fewer Ethereans advocating for Ethereum and conveying information, we end up experiencing a slightly distorted version of reality shaped and dominated by Ethereum's opponents. Negative information appears more frequently than positive information, which both fuels and exaggerates the pessimistic sentiment surrounding Ethereum.

Secondly, there is a mindset among Ethereans that emphasizes research, which alienates some people.

When Ethereans discuss things on Twitter or other social media, their conversations are often difficult to understand and full of jargon. This makes potential users feel alienated, and even possibly frustrated.

For example, users may complain about the understandable issue of high transaction fees making small transactions impossible. But then they see prominent Ethereans using difficult to understand and somewhat absurd terms, such as "Proto-Danksharding." This makes them feel that their concerns are not being taken seriously.

Now, I don't want to be too critical here. Ethereum—and blockchain in general—is very complex and involves difficult trade-offs that many ordinary users cannot understand.

But at the same time, if Ethereans continue in this way, they will never win the narrative battle. While this may be difficult, they need to find better ways to acknowledge the complaints of ordinary users while explaining in simple terms why certain design decisions are made and what is being done to help address the issues.

To be honest, this may be impossible. Most people don't want to understand why things are the way they are, or they don't have the time to learn. Instead, they will think that Ethereum is clunky and expensive because it uses old outdated technology. And they will think that prominent Ethereans don't care at all because they are wealthy and out of touch with ordinary people.

In the long run, this may not be a big problem. If Ethereum's theory is correct, people will eventually use low-fee L2 without even realizing it. They may not even know they are using L2, let alone within the Ethereum ecosystem.

But before all the difficulties are abstracted, users will notice Ethereum's shortcomings and complain about them. And these complaints will continue to fuel the negative atmosphere surrounding Ethereum, making Ethereans appear out of touch. Unless Ethereans can streamline their information enough to break through the noise and explain their methods in a clear, understandable, and relatable way.

2. Will the ETF Change the Situation?

All of these factors have contributed to ETH's poor performance and the subdued atmosphere surrounding Ethereum over the past few months.

So the question now is, will the ETF help change this situation?

I believe it will. Or at least, it should change the situation in a more favorable environment and without macro trends interfering.

This is because the approval of the ETF will address many of the reasons that have led to Ethereum's poor performance.

1) Resolution of Security Concerns

First, the approval of the ETF eliminates most of the concerns and uncertainties about whether Ethereum will be classified as a security.

While the SEC still has the potential to take action against staked ETH, the impact of this scenario will not be as severe as classifying ETH itself as a security. Therefore, the financial impact of this threat will be much smaller.

And even this threat now seems relatively unlikely.

The approval of the ETF seems to be a political move by the Democratic Party as they try to position themselves favorably before the elections.

If they do indeed want to attract cryptocurrency voters—or at least not scare them away—pursuing actions like attacking the second largest cryptocurrency asset is clearly unwise.

Therefore, Ethereum suddenly escapes the dilemma, and the main argument against investing in ETH has been overturned.

2) Attracting New Buyers

The ETF will also help address Ethereum's lack of buyers.

Not only will it bring Ethereum to a new and extremely wealthy group of institutional investors, but it will also give cryptocurrency natives a reason to buy ETH again.

Many cryptocurrency natives may be caught off guard by the approval of the ETF. They may have sold ETH early in the bull market and invested in more attractive and better-performing assets. But now, with their holdings insufficient, they may want to make adjustments.

At the same time, traders and short-term investors may flock back to ETH, trying to buy ahead of and speculate on the launch of the ETF.

Then, once the ETF is launched, traditional financial funds will dominate the price trend.

I don't expect the performance of these funds to be as outstanding as the Bitcoin ETF, but I believe their impact and performance on the price of ETH should be relatively similar in terms of market size.

In the long run, the ETF opens the door to a large influx of wealth into ETH and the Ethereum ecosystem. In short, the ETF should attract new buyers and funds to Ethereum in the short and long term, which is exactly what ETH needs to start rising again.

3) Resetting the Narrative

We have seen that price trends and narratives are closely linked.

If the excitement and rush to the ETF indeed lead to short-term outperformance of ETH compared to other assets, this may be enough to kickstart the narrative wheel.

At the very least, positive price trends will reduce concerns about competitors such as Solana and Bitcoin encroaching on the Ethereum space. While the impact of price trends on public opinion may seem absurd, it is a common phenomenon.

But the biggest narrative benefit of ETF approval is that it reminds people of the uniqueness and specialness of Ethereum compared to other "altcoins".

Ultimately, only two cryptocurrencies are considered reliable and respected enough to have an ETF in the near future. This indicates that, apart from Bitcoin, Ethereum is the only cryptocurrency that is institutionally friendly.

Unlike Bitcoin, which continues to be positioned as digital gold, Ethereum is associated with technological innovation. Therefore, anyone in the traditional financial world who wants to engage with the most dynamic and high-potential area of the crypto industry must buy ETH.

We see once again the fusion of reliability and excitement that has made ETH the default asset for cryptocurrency natives. It is safe enough to invest in, yet still offers tremendous returns.

With the right marketing, Ethereum may even become more popular among traditional investors than Bitcoin.

Bitcoin already has a huge first-mover advantage and better brand recognition in the market, but its story is relatively flat.

Most people are not particularly interested in gold, so they may not be interested in digital gold either. But many people like tech investments that grow rapidly and produce tangible returns—this sounds more like Ethereum.

However, traditional financial professionals may already view Bitcoin as an exotic asset with high risk and potential, so they may not be willing to further explore the risk curve—even if the returns may be slightly higher.

Therefore, I believe the opportunity for ETH to become the default asset again is relatively low—at least in the short term. But it is not unimaginable if there is enough time and clear information.

Even if this never happens, the launch of the ETF will be an important moment—almost a reset point—for Ethereum and its narrative.

At the very least, it sets Ethereum apart from other smart contract platforms and provides some breathing room after the continued onslaught from Solana. It should help ETH rise alongside Bitcoin and Solana, rather than being swallowed by them. After enduring a long period of encroachment from competitors, I believe many Ethereum supporters will see it as a victory.

4) Professional Marketing

The launch of the ETF may even help Ethereum address its marketing issues.

Once the ETF is launched, ETF issuers will be responsible for promoting their products to potential clients. This means they will need to start explaining what Ethereum is in simple terms—avoiding technical jargon and overly complex language.

While this may be a bit late for cryptocurrency natives, it should mean that traditional financial professionals have a slightly better introduction to Ethereum. Who knows, maybe some Ethereum supporters will absorb some marketing language and improve their own promotion.

5) Reducing Dilution

The ETF should also help alleviate the dilution issue.

Of course, cryptocurrency natives will still allocate funds to various Ethereum-related assets in search of maximum returns.

However, the ETF itself will be limited to plain ETH. All incoming funds will be concentrated on Ethereum. Depending on the success of the issuance, this could mean a large influx of funds into a single asset—potentially offsetting the dilution effect among cryptocurrency natives.

3. But Are There Risks?

From this analysis, it seems that the ETF will address almost all the issues that have led to Ethereum's poor performance and negative outlook.

Some improvements may take time to materialize—especially changes in marketing and the introduction of new institutional investors—but we should start to feel these benefits in the next 12 to 18 months.

If this is the case, it is reasonable to believe that the ETF will awaken Ethereum, drive price increases, and bring a more positive attitude to the field.

But of course, nothing is guaranteed to go smoothly. There are many risks that could lead to failure, and Ethereum may continue to languish.

Today, people are more inclined to believe negative news about Ethereum. When negative sentiment persists for so long, this is a common occurrence. Therefore, Ethereum is particularly vulnerable to any negative surprises or price stagnation when these funds are launched. After all, this would confirm everyone's existing biases that the era of Ethereum is over and it is heading for decline.

In the worst case, this negativity may even spread from crypto Twitter to the broader world, leading to reduced demand for the ETF. I don't necessarily expect this to happen, but people are not always rational, and emotions can play a significant role in investment decisions—even for so-called "smart money".

Obvious short-term risks include ETF fund inflows being much lower than expected or Grayscale fund outflows being higher than expected. In either case, Ethereum could be significantly affected.

In the long term, the biggest issue is that Ethereum has failed to establish itself as an interesting or worthwhile investment asset in the traditional financial realm. They seem to have some interest in Bitcoin, so we all assume they would also like Ethereum, but we don't really know that yet. Clearly, the enthusiasm for an Ethereum ETF is far less than for a Bitcoin ETF—although this is to be expected. But if Ethereum fails to generate interest or excitement even after its mainstream debut and marketing materials, it may be in trouble.

4. Does It Really Matter?

The last question worth considering is: "Does this really matter?"

Even if ETH's price performance is poor, so what? The way Ethereum operates will not change with the fluctuation of ETH's price. Whether ETH is worth $10 or $10,000, the network's functionality remains the same—although security may differ.

Furthermore, all of this is very focused on the short term, while Ethereum is focused on sustainability and long-term goals.

Price trends, market sentiment, and narratives are essentially noise in Ethereum's daily operations. They do not have a huge impact on how Ethereum operates.

However, the reason I write about these issues is not so superficial. After all, I usually don't focus on short-term price trends.

I believe these issues are important because the narratives and market sentiment surrounding protocols like Ethereum will impact their future success. Today's seemingly inconsequential noise may eventually form patterns and lead trends.

No one wants to develop on a chain that is perceived to be in decline. No one wants to use that chain—especially when it seems there are not enough developers to create exciting new opportunities.

This situation will not happen overnight, but if Ethereum cannot start to improve its performance—if it cannot change the narrative and start gaining some momentum—then it will gradually shift more and more activity to its competitors.

Its strong network effects, once thought to be almost unbeatable, will be gradually eroded.

The threat is not immediate, and the risk is relatively low—at least for now.

Contrary to popular belief, Ethereum still leads competitors in almost all meaningful metrics. ETH being the only altcoin with an ETF indicates that it is ahead of competitors in some respects. Platforms like Solana may still need several years to have similar mainstream financial products.

But Ethereum cannot be complacent, it cannot waste its lead. Especially when the crypto industry is so nascent and poised for significant growth in the coming years. Things may—and likely will—change faster than many people expect.

Ethereum's first-mover advantage, network effects, and long-term philosophy mean it has a great chance of becoming the dominant crypto platform in the foreseeable future.

But success is by no means guaranteed. Whatever it does, Ethereum cannot let negative sentiment persist for too long. The upcoming issuance of the ETF may be the best opportunity to dispel this negativity.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。