🤑 It doesn’t get more affordable. Grab this 60% OFF Black Friday offer before it disappears…CLAIM SALE

Is Ethereum 'This Cycle's Basket Case'? 10x Research Points Out ETH's 'Only Bull Story'

Published 08/05/2024, 14:52
Updated 08/05/2024, 16:10
© Reuters.  Is Ethereum 'This Cycle's Basket Case'? 10x Research Points Out ETH's 'Only Bull Story'
BTC/USD
-
ETH/USD
-
ETH/USD
-

Benzinga - by Murtuza Merchant, Benzinga Staff Writer.

A new report characterizes Ethereum (CRYPTO: ETH) as this cycle’s underperformer in the cryptocurrency market, with ongoing challenges that are impacting its valuation and adoption.

What Happened: Despite its strong historical correlation with Bitcoin (CRYPTO: BTC), Ethereum’s fundamentals are seen as a potential impediment to broader investment in the cryptocurrency ecosystem, according to 10x Research.

“Ethereum remains this cycle's basket case,” analyst Markus Thielen notes, highlighting the surprising stability of its correlation with Bitcoin at an R-square of 95%.

This linkage, however, has not translated into positive momentum for Ethereum due to its sluggish adaptation to market demands and technological advancements.

In the past, Ethereum was envisioned as a potential disruptor to traditional banking systems, with capabilities extending into areas like NFT minting and broad wallet adoption.

However, according to Thielen, “Ethereum developers did not react quickly enough,” which has resulted in lost opportunities and declining market share.

From a high of controlling 17.8% of the market, Ethereum's dominance has slipped to 15.8%.

The digital gold narrative, heavily promoted by institutions like Blackrock, has focused predominantly on Bitcoin, relegating Ethereum to a secondary position.

Thielen points out, “Blackrock themselves have said that ‘Bitcoin is overwhelmingly the No. 1 focus and a little bit Ethereum'.”

This sentiment is echoed in the lukewarm reception to Ethereum ETFs in Hong Kong, where they attracted only 15% of the inflows compared to Bitcoin’s 85%.

Further complicating Ethereum’s landscape are the regulatory uncertainties in the United States. The SEC has been notably silent on the approval of Ether ETFs, with expectations leaning towards denial.

“Bloomberg analysts close to the ETF approval process have downgraded their probability from 50% to 35%,” Thielen reports, indicating a bleak outlook for regulatory progress.

Also Read: Hong Kong Launches First $128M Crypto ETF Liquidity Fund

Why It Matters: The technical and economic aspects of Ethereum are also showing signs of strain. A significant indicator is the sharp decline in ETH Gas fees, suggesting a drop in transaction demand.

This observation led 10x Research to adopt a bearish stance on Ethereum as early as April 2, when ETH traded at $3,500, predicting much lower prices ahead.

Additionally, Ethereum has struggled to maintain its relevance in the stablecoin arena, losing ground to Tron in the issuance of Tether.

Thielen comments on the shifting landscape, “USDT (CRYPTO: USDT) on Tron (CRYPTO: TRON) for transfers is snowballing, and while stablecoin growth is bullish, Ethereum is missing out.”

In the investment sphere, the allure of Ethereum as a staking platform is waning. “The only Ethereum bull story there is staking and re-staking,” Thielen observes.

However, with on-chain Treasury yields offering more attractive returns, the incentive for staking Ethereum has diminished, leading to reduced demand for ETH.

What’s Next: As the digital assets sector evolves, the challenges faced by Ethereum will be a topic of keen interest at the upcoming Benzinga’s Future of Digital Assets event on Nov. 19.

The event will provide a platform for experts to delve into the broader implications of Ethereum's struggles and what it means for the future trajectory of blockchain technologies and digital currencies.

Read Next: Japanese Crypto Exchange Coincheck To List On Nasdaq Listing Via SPAC Merger

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Read the original article on Benzinga

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.