ETC Group has advised investors to maintain their holdings in Ethereum (ETH), Solana (SOL), and Aptos (APT) due to their significant roles in the layer-1 blockchain sector, as indicated in a report published on October 8.
Ethereum Faces Challenges
As Ethereum encounters increasing competition from emerging blockchains, the report emphasizes the necessity of analyzing both recent market conditions and long-term trends.
The report identifies three primary factors contributing to Ethereum’s lackluster performance in the third quarter. The most notable was the Dencun update, which considerably reduced gas fees, thereby enhancing the efficiency of layer-2 networks. This reduction resulted in decreased transaction fees and lower activity on the Ethereum mainnet, negatively affecting user sentiment.
Moreover, the early August market crash, triggered by the unwinding of the Japanese Yen carry trade, led to widespread deleveraging across the cryptocurrency market, significantly impacting Ethereum. Additionally, the disappointing performance of spot Ethereum exchange-traded funds (ETFs) contributed to the subpar results for the quarter. According to Farside Investors data, spot Ethereum ETFs have seen negative net flows amounting to $546 million since their inception.
Despite these challenges, the analysis from ETC Group suggests that Ethereum appears resilient when assessed year-to-date, boasting a performance index of 101. In comparison, Solana stands at 128, and Aptos at 78.
To evaluate network dominance, the report utilized the Comprehensive Network Dominance Index (CNDI), incorporating metrics such as Network Utilization Efficiency (NUE) and Economic Density Index (EDI). Ethereum retains the highest market share at 45%, followed by Solana with 35% and Aptos at 20%. The report attributes Ethereum’s sustained market leadership to its well-established ecosystem and continuous user engagement, which have fortified its long-term position amidst rising competition.
Solana and Aptos Growth
The report indicates that Solana has shown a robust ability to draw in users and developers, with bridged net flow growth reaching $1 billion in the third quarter. This trend positions Solana as an appealing asset for investors, as its growth trajectory is expected to persist in a bullish market. However, the report warns that Solana’s market dominance could face challenges in the coming months as Aptos begins to gain traction, potentially affecting Solana’s growth forecasts.
While Aptos holds a relatively modest market share, it has emerged as a promising competitor in the layer-1 space, exhibiting 23% higher developer activity compared to the average of other networks. Aptos has successfully leveraged its position in the blockchain gaming sector, demonstrating a strong ability to process high transaction volumes efficiently at low costs.
Nevertheless, the report notes that Aptos must overcome obstacles related to developer adoption due to the relatively nascent Move programming language, which lacks widespread acceptance. In contrast, Solana benefits from using Rust, which offers more mature tools and infrastructure, giving it a competitive advantage.
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