Cryptocurrency enthusiasts and investors have recently observed a significant decline in the price of Ethereum (ETH) relative to Bitcoin (BTC) and Solana (SOL).
This decline has led to concerns about the future of Ethereum, with some critics predicting its demise. The Ethereum to Bitcoin price ratio hit a two-year low on December 20, 2023, raising questions about the network’s performance and competitiveness in the crypto space.
Ethereum’s struggles against Bitcoin and Solana
Ethereum’s performance in the crypto market has raised eyebrows as its price lags behind Bitcoin and Solana. In December, the Ethereum to Bitcoin price ratio fell below 0.05 BTC, marking its lowest level in two years.
This decline is particularly significant compared to the peak ratio of 0.087 BTC achieved during the previous bull market in September 2021. Since the beginning of 2023, the ratio has hovered around 0.072 but has continued to decline.
Critics have pointed to Ethereum’s high transaction fees as a key factor contributing to its underperformance. The network’s fees averaged around $11 in December, whereas Bitcoin fees remained higher at approximately $32. In stark contrast, Solana consistently boasts fees well below $0.01.
Even Ethereum co-founder Vitalik Buterin has acknowledged the issue, stating that Ethereum could ultimately “fail” unless transaction fees become more affordable, especially during bull markets.
Ethereum defenders speak out
Despite the criticism, Ethereum has garnered support from its loyal proponents. Anthony Sassano, host of “The Daily Gwei,” firmly believes that Ethereum is undervalued in the current market. Ryan Sean Adams, co-host of “Bankless,” expressed his surprise at the negative sentiment surrounding Ethereum, emphasizing his long-term belief in the platform.
“I never anticipated ETH would be viewed as a non-consensus underdog again, yet here we are. Long ETH 2024,” said Adams.
Solana’s rise and competition with Ethereum
Solana has emerged as a formidable competitor to Ethereum, with its price outperforming ETH and other cryptocurrencies in recent months. Over the last 24 hours, SOL has surged by 12% to reach $83, according to CoinMarketCap.
Some pundits have highlighted Solana’s dominance in decentralized exchange (DEX), stablecoin, and nonfungible token (NFT) trading volumes over 24-hour and seven-day intervals, fueling speculation that Solana could eventually surpass Ethereum.
However, Ethereum maintains its strength in terms of total value locked (TVL) on its network, boasting a TVL of $28 billion. In contrast, Solana holds the fifth position in TVL with $1.15 billion, according to DefiLlama.
Ethereum’s market cap/TVL (Mcap/TVL) ratio is 9.4, while Solana’s is 30.45. This metric suggests that Ethereum may be undervalued relative to Solana despite its lower market cap.
The future of Ethereum and its challenges
As Ethereum faces criticism and competition from Solana, it must address key challenges to maintain its position in the cryptocurrency ecosystem. Lowering transaction fees and improving scalability are critical for Ethereum to remain competitive.
The crypto community eagerly anticipates the network’s transition to Ethereum 2.0 with its promise of enhanced performance and reduced fees.
Investors and enthusiasts are closely watching how Ethereum responds to these challenges and whether it can regain its footing against Bitcoin and Solana. The cryptocurrency market is dynamic, and Ethereum’s ability to adapt and innovate will play a crucial role in determining its future success.
