Ethereum has been the leading smart contract blockchain for years now. The blockchain’s native cryptocurrency, ETH, has a native market capitalization in excess of $25 billion.
$25 billion is an order of magnitude higher than the market capitalization of Cardano’s ADA, $2.5 billion. Cardano, of course, is Ethereum’s primary competitor. And $25 billion is two orders of magnitude higher than the value of Zilliqa (ZIL), another competitor.
Despite the asset’s dominance, analysts see Ethereum losing market share to competitors in the years ahead. Here’s why, as explained by a fund manager.
Why Ethereum Could Lose Market Share Against Competitors
A managing partner at BlockTower Capital, Joseph Todaro recently explained why “many little-known Ethereum rivals will significantly outperform ETH” this cycle.
He released a multi-part thread on the matter on July 6th to convey this sentiment.
https://twitter.com/JosephTodaro_/status/1280178690916323328
Todaro said that despite his ETH holdings, he thinks transaction fees will “skyrocket” as Ethereum continues to find product-market fit via DeFi. “Scalability will raise its ugly head once again,” were his exact words.
High transaction fees and a limited number of users and transactions is perfect weather for a “dark horse” competitor to emerge. As the investor remarked:
“For awhile the dark horse goes unnoticed. It doesn’t yet have its army of shillers who will provide warm feelings of confidence and certainty of success. But they are coming. […] It is time, once again, to look at the neglected and scorned ETH competitors.”
Todaro did not name any competitors. Yet, there’s a serious chance a protocol war plays out as projects aim to come out on top of the next bull run.
And with ADA strongly outperforming ETH, it may have just begun.
Is ETH Even a Good Investment?
Although Todaro seemingly made his comments with the premise that ETH will still do well, some have questioned that sentiment entirely.
Exponential Investments’ CIO and VP of Portfolio Management, Steven McClurg and Leah Wald, say that the asset isn’t a viable investment.
Like Todaro, they targeted Ethereum’s high gas fees as a potential Achille’s heel for the network and ETH by extension:
“The issues inherent in gas costs have created congestion, which is a negative network externality. Congestion on Ethereum has led to poor user experience, especially for traders in this highly volatile environment, as their leveraged positions may be liquidated before they can act.”
In a previous analysis, the duo explained that there are multiple other reasons why they prefer Bitcoin over Ethereum. Some of those reasons are as follows:
- Ethereum’s monetary policy, which may soon be changed by “staking,” is erratic without any proper stability.
- The network “prioritizes flexibility, compromising on security, speed, and cost.”
- “The Ethereum network inherently requires a much larger number of on-chain transactions to be useful.”
Facing competitors and its own problems, ETH will experience tailwinds in the years ahead. Yet it should not be forgotten that Ethereum will see technical improvements and other shifts that may boost its investment viability and price performance.
Featured Image from Shutterstock Price tags: ethusd, ethbtc Charts from TradingView.com Fund Manager Explains Why Ethereum Rivals Will Significantly Outperform ETH