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

A new report characterizes Ethereum ETH/USD 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 BTC/USD, 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 USDT/USD on Tron TRON/USD 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.

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