Ethereum: The ‘Microsoft of Blockchains’ – Can ETH Make a Comeback?

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Bitwise Chief Investment Officer Matt Hougan has dubbed Ethereum (ETH) the ‘Microsoft of blockchains,’ boldly claiming that none of the smart contract platform’s current challenges are existential.

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Ethereum’s Challenges: A Contrarian Perspective

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In a recent memo titled ‘A Contrarian Bet on Ethereum,’ Hougan acknowledged the declining ETH/BTC trading pair, indicating Ethereum’s weakening price against Bitcoin (BTC). The pair is currently trading at 0.038, its lowest level in three years.

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Ethereum’s performance in 2024 hasn’t been as explosive as some other leading digital currencies. While Bitcoin is up 38% year-to-date and Solana (SOL) has gained 31%, Ethereum has remained relatively flat, trading at $2,306.

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Hougan attributes this underperformance to a prevailing negativity surrounding Ethereum. He identifies several factors that might be contributing to this sentiment, including:

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• The potential for a Democratic US presidential victory and continued skepticism towards crypto from the Biden administration.

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• The emergence of competing blockchain projects like Solana, offering higher throughput and lower transaction costs.

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• The slower adoption of Ethereum-based exchange-traded funds (ETFs) compared to Bitcoin ETFs.

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• The success of Layer-2 solutions like Base, Arbitrum, and Optimism, which have diverted transaction volume from Ethereum, leading to a four-year low in Ethereum’s revenue.

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Why Hougan Remains Bullish

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Despite these challenges, Hougan emphasizes that they miss the bigger picture. Ethereum continues to dominate key blockchain applications:

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• Over 50% of stablecoins are issued on the ETH blockchain.

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• Over 60% of DeFi assets are locked in Ethereum-powered protocols.

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Institutional confidence in Ethereum remains strong. BlackRock, a leading asset manager, is developing a tokenized money market on Ethereum, and Nike has chosen Ethereum to launch its Web3 gear platform, Swoosh.

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Hougan argues:

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Ethereum has the most active developers, the most active users, and a market cap that is 5x bigger than its closest competitor. It’s the only programmable blockchain that has a modicum of regulatory support in the U.S., with a booming regulated futures market and a multi-billion-dollar ETF market.

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He draws a parallel between Ethereum and Microsoft, highlighting how Microsoft’s dominant position in the tech industry has endured despite the emergence of other successful companies like Google, Zoom, and Slack.

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Hougan concludes that Ethereum’s potential is immense. As the November US presidential elections approach, the market may see a renewed interest in the second-largest cryptocurrency by market cap.

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At press time, ETH is trading at $2,306, with a total market cap of $277 billion.

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Featured image from Unsplash, Chart from Tradingview.com