ETC Group advised investors to hold ethereum (eth), Solana (SOL), and Aptos (APT) due to their strategic importance in the layer 1 blockchain space in an October 8 meeting. crypto-market-espresso-etcgroup-bitwise-rv5oe/?trackingId=6uV%2BUmVyRmODh3PAW53cZQ%3D%3D”>report.
As ethereum faces increasing competition from newer blockchains, the report highlighted the importance of evaluating recent market conditions and long-term performance.
ethereum faces challenges
According to the report, ethereum's poor performance in the third quarter was due to three main factors, the main of which was the Dencun upgrade, which significantly reduced gas fees to increase the efficiency of Layer 2 networks.
This caused a drop in transaction fees and network activity on the ethereum mainnet, negatively affecting user sentiment about the network.
Additionally, the market crash in early August caused by the cancellation of the Japanese yen carry trade caused deleveraging across the market, with eth being one of the hardest hit.
The report noted that the lackluster performance of ethereum spot ETFs has also contributed to the poor performance of the quarter, which is the weakness of exchange-traded fund (ETF) flows. Since their launch, ethereum spot ETFs have recorded negative net flows of $546 million, according to data from Farside Investors.
Despite these setbacks, ETC Group analysis suggested that ethereum appears resilient so far this year, maintaining a performance index of 101 compared to Solana's 128 and Aptos' 78.
The report calculated network dominance using the Comprehensive Network Domain Index (CNDI), which combines metrics such as Network Utilization Efficiency (NUE) and Economic Density Index (EDI).
According to their findings, ethereum remains the most dominant network, with a 45% market share, followed by Solana at 35% and Aptos at 20%. The report attributed ethereum's enduring market leadership to its well-established ecosystem and consistent user engagement, which have strengthened its long-term position despite growing competition.
Solana, growth of Aptos
According to the report, Solana has demonstrated a sustainable ability to attract users and developers based on its bridging net flow growth, which reached $1 billion during the third quarter.
This makes it an attractive asset for investors as its growth trajectory is likely to continue in a bullish scenario. However, he added that Solana's dominance could be challenged in the coming months as Aptos gains momentum, which could curb some of its growth projections.
Despite the relatively small market share, Aptos has shown promise as a competitor in the Layer 1 space, with developer activity 23% higher than the average for other networks. The network has capitalized on its success in the blockchain gaming sector and has demonstrated a strong ability to handle large volumes of transactions efficiently at low costs.
However, the report noted that Aptos faces hurdles in developer adoption due to the relatively new Move programming language, which has yet to gain widespread support. In contrast, Solana's use of Rust offers mature tools and infrastructure, giving it an advantage.
