Fred Krueger, a crypto investor, believes ethereum is overvalued at spot exchange rates. Referring to X, Krueger aggregate that ethereum supporters are “detached from reality” after eth, the native currency, recently surpassed $3,000.
The investor pointed to the overall decline in on-chain activity, fierce competition from alternatives like Solana and Avalanche, for example, and regulatory uncertainty that makes holding the coin risky.
ethereum is slow and its usage is declining
Krueger argues that ethereum on-chain transactions could be faster and cheaper. In the current landscape marked by scalable, low-fee alternatives, whether built on top of ethereum or existing as standalone chains, on-chain challenges no longer justify trading eth at spot rates of around $3,000.
Beyond the scaling and performance challenges, the investor also refers to the sharp decline in daily active users (DAU) on the mainnet. Since 2021, ethereum and altcoin prices have peaked, and active DAUs have fallen from around 120,000 to around 66,000 in February 2024.
Although supporters of the network said there have been developments such as Layer 2 platforms like Arbitrum pinning their security on ethereum, Krueger notes that even the most active and largest protocols by total value locked (TVL) have experienced user losses.
As an example, Uniswap V3, the third version of one of ethereum's largest decentralized exchanges, Uniswap, now registers around 16,000 daily active users, significantly less than in previous years.
Alternatives like Solana offer better deals: Is eth expensive?
The investor maintains that the decline in DAUs, which points to active usage, stands in stark contrast to ethereum's growing market capitalization and spot rates. In Krueger's opinion, this emerging situation is the reason why ethereum has become an inflated “meme coin” like Shiba Inu, considering its high market capitalization.
As assessed by investors, faster and cheaper alternatives such as Solana, Avalanche and Near Protocol offer better value for specific use cases such as decentralized finance (DeFi) and gaming.
Krueger also took issue with the lack of regulatory clarity around ethereum. The United States Securities and Exchange Commission (SEC) recently approved the first batch of spot bitcoin exchange-traded funds (ETFs). Primarily, this is because SEC officials recognize bitcoin as a commodity.
Gary Gensler and the SEC failed to classify eth in the same category as btc. Consequently, although the broader crypto community is optimistic about the eventual authorization of an ethereum spot ETF, Krueger believes it is unlikely.
Still, time will only tell how ethereum and its market valuation will evolve in the coming months. Supporters are optimistic, despite criticism, that the growing adoption and deflationary nature of eth will lift prices towards 2021 highs of $5,000.
Featured image of DALLE, TradingView chart
Disclaimer: The article is provided for educational purposes only. It does not represent NewsBTC's views on whether to buy, sell or hold investments, and investing naturally carries risks. It is recommended that you conduct your own research before making any investment decisions. Use the information provided on this website at your own risk.
