Despite the 50% collapse that Bitcoin has incurred over the second half of 2019, the cryptocurrency remains up 70% since January 1st.
While 70% may sound like a paltry gain for altcoin traders, who are used to flipping cryptocurrencies for hundreds of percent, this gain means that Bitcoin has outperformed all other major asset classes, from commodities and American equities to real estate and investment-grade company bonds.
But that doesn’t mean all cryptocurrencies have done so well. In fact, reports indicate that Ethereum, the second-largest cryptocurrency by market capitalization, is down on the year, not up.
This begs two questions: 1) Why has Ethereum underperformed Bitcoin by such a drastic margin? And 2) Do bulls of ETH have anything to look forward to?
Ethereum Underperforms Bitcoin
As hinted at in Blockonomi’s Monday report about the latest downturn in the crypto markets, Ethereum has been hit especially hard over recent trading sessions.
In fact, in the past 24 hours, the cryptocurrency has lost some 15%, tumbling from above $140 to $122, where it sits as of the time of writing this article. This means that since the start of this fateful year, the cryptocurrency is trading down some 1.3%, according to Bloomberg.
This harrowing trend has been attributed to three primary factors, which are as follows:
- Altcoins have largely underperformed Bitcoin over the past 20 months, with Bitcoin dominance — the percentage of the cryptocurrency market made up by BTC — surging to a high of 72% this year from 33% early in 2018. This refocusing on the market leader, caused by institutional involvement and a consensus that a majority of altcoins have no future prospects, has resulted in a relative decline in everything from Ethereum and XRP to MakerDAO and DASH.
- Prominent cryptocurrency trader Mati Greenspan, who founded Quantum Economics, told Bloomberg that he believes that Ethereum’s relatively complex “tokenomics” may have contributed to a decline, citing the fact that the cryptocurrency has no supply cap, much unlike Bitcoin’s hard limit of 21 million coins that will ever be mined.
- Over the course of the past year or two, a scam going by “PlusToken” has managed to procure millions of dollars worth of Ethereum and Bitcoin, which have begun to be liquidated on the open market. Although PlusToken owns more Bitcoin than Ethereum, chain analytics firms suggest, ETH is a less liquid market, meaning that mass liquidations could have had an adverse effect on the price trend.
Is All Hope Lost?
Despite the worrying price trend that Ethereum established in the past 12 months, some assert that the cryptocurrency’s fundamental trend remains decidedly positive.
Per previous reports from Blockonomi, Fidelity Investments’ cryptocurrency branch, Fidelity Digital Assets, was recently reported by industry outlet The Block to have shown intentions to launch support for Ethereum in 2020.
Should Fidelity live up to its promises, institutional traders across the world may soon have access to Wall Street-grade custody and trade execution services for Ethereum, potentially acting as a catalyst for greater levels of institutional investment.
This comes shortly after Ethereum developers rolled out the latest iteration of the software, “Istanbul.” This hard fork brings a number of improvements to the chain, including a technical upgrade that allows Ethereum to better interact with another popular altcoin, ZCash.
Also, early iterations of Serenity, the overarching term given to Ethereum’s next phase of development that will see the blockchain become one based on staking. are expected to be launched early next year.
While it is unlikely that the rollout will be smooth, developers and commentators in the cryptocurrency space believe that once Serenity is fully activated, Ethereum will cast aside any scaling concerns, allowing for a new wave of adoption to grace the blockchain, potentially acting as a monumental positive demand shift in the market of ETH.
So, despite the poor performance on the year, not all hope is lost for ETH.