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Ethereum Hits 3-Year Low Against Bitcoin Amid Layer-2 Concerns and Solana’s Rise

Ethereum Hits 3-Year Low Against Bitcoin Amid Layer-2 Concerns and Solana's Rise

Ethereum’s native token (ETH) has plummeted to its lowest level against Bitcoin in over three years, reaching 0.0367 BTC on October 25, 2024. This decline comes amid growing competition from alternative layer-1 blockchain projects and shifting institutional interest toward Bitcoin ETFs.

Market Dynamics and Institutional Flows

The introduction of spot Bitcoin ETFs in January 2024 has dramatically redirected institutional capital toward the BTC market, overshadowing the subsequent launch of Ethereum ETFs. This shift in institutional focus has contributed to Ethereum’s underperformance relative to its primary competitor.

Adding to the pressure, Solana (SOL) has emerged as a formidable competitor, reaching record highs against Ethereum earlier this week. The rise of Solana has sparked discussions about potential market capitalization flipping, though Ethereum maintains a significant lead with a market cap over $300 million compared to Solana’s $82 million.

ETH/BTC Technical Analysis Points to Potential Recovery

Despite the current downturn, technical indicators suggest a possible sharp recovery for the ETH/BTC pair. The pair has been consolidating within a falling wedge pattern since August 2024, a formation often associated with trend reversals. Key technical observations include:

  • Current trading near the wedge’s lower trendline, suggesting a potential rebound toward 0.0383 BTC
  • A possible recovery target of 0.0447 BTC by year-end if the price breaks above the upper trendline
  • Bullish divergence between the daily Relative Strength Index (RSI) and price action
  • The 0.0447 BTC target coincides with the 200-day exponential moving average

Layer-2 Impact and Revenue Concerns

Industry experts are divided on the impact of Ethereum’s layer-2 scaling solutions on the network’s revenue. Katalin Tischhauser, Head of Research at Sygnum Bank, suggests it’s premature to conclude whether the layer-2 strategy is cannibalizing or fostering growth. “The long-term view is that the NET effect will be growth for the Ethereum L1 because the cheap L2s can catalyze new types of transactions previously not possible,” Tischhauser noted.

However, concerns intensified after Uniswap’s announcement of its pivot to layer-2 Unichain, which could potentially reduce Ethereum validator revenue by $400-500 million annually. This development has led VanEck to revise its 2030 Ether price prediction from $22,200 to $7,300.

Institutional Developments

In related news, Grayscale Investments has announced the upcoming rebranding of its Ethereum Trust to Grayscale Ethereum Trust ETF, effective November 4, 2024. The trust, trading under ticker ETHE, has demonstrated strong performance with a 75.58% price total return over the past year, despite recent market volatility.

Market Outlook

While short-term sentiment remains bearish, some analysts, including Apollo Capital’s Chief Investment Officer Henrik Andersson, maintain optimistic long-term views. Andersson suggests Ethereum could potentially reach new all-time highs in 2025, arguing that the network’s scaling strategy has actually helped maintain its position as the leading layer-1 blockchain.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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