The cryptocurrency community has long debated whether Ethereum (ETH) could one day surpass Bitcoin (BTC) in market capitalization. This scenario is often referred to as “flippening.” But Markus Thielen, head of research at 10x Research, remains skeptical.
According to Thielen, Ethereum’s weak fundamentals and recent performance trends strongly suggest that Bitcoin will maintain its dominance.
How Ethereum Has Left Behind
Bitcoin, often referred to as digital gold, has solidified its role as a hedge against inflation and a key asset in “sovereign” portfolios around the world. This identity was further strengthened in 2017 when Bitcoin developers decided to maintain a 1MB block size, emphasizing its status as a store of value rather than a currency.
This strategic move has made Bitcoin particularly attractive amid economic uncertainty.
On the contrary, Ethereum’s journey was full of difficulties. Despite playing a significant role in the 2020-2021 bull cycle through innovations like NFTs and the potential to replace banking systems, Ethereum is suffering from severe scaling issues.
The long-delayed Dencun upgrade (EIP-4844) to reduce high gas costs was not released until three years after these problems became apparent.
“The Dencun upgrade (EIP-4844) fixed this issue in March 2024, but it was three years late. Cryptocurrency users (and traders) are not going to sit back and wait for blockchain to solve its bottlenecks. Instead, those users move around, and most of the work today happens at Layer 2,” Thielen said.
As a result, Ethereum’s dominance in the cryptocurrency market decreased from 17.8% to 15.8% after the upgrade. Moreover, the ETH/BTC trading pair has been in a downward trend since September 2022.
“Forget the BTC flip that many people predicted,” Thielen boldly said.
Read more: What is the Ethereum Cancun-Deneb (Dencun) Upgrade?
Reflecting these differences, Blackrock appears to favor Bitcoin over Ethereum. The market also reflects this. For example, the Ethereum ETF has only 15% of inflows in Hong Kong compared to Bitcoin, indicating limited investor interest in Ethereum.
Moreover, the regulatory environment remains a significant barrier to Ethereum. Recent SEC actions against exchanges like Kraken and Coinbase have made Ethereum’s security classification unclear. With the SEC expected to reject an Ethereum ETF, regulatory uncertainty will only deepen.
Financial indicators also highlight Ethereum’s difficulties. The shift to so-called “ultrasonic money” has not resonated with investors as much as expected. Moreover, the total value of Ethereum locked in the protocol (TVL) is well below its peak and is mainly limited to staking and re-staking activity.
“As soon as US Treasury yields were available on-chain at a much higher yield (5%), the concept of Ethereum staking became flawed. At the same time, Ethereum usage plummeted. As more people realize this, the demand for ETH will decrease,” Thielen explained.
Read more: Ethereum Restake: What is it and how does it work?
Moreover, Ethereum has lost ground in the stablecoin market, a key area for cryptocurrency trading. Tron has surpassed Ethereum in USDT issuance thanks to its lower transaction costs, indicating Ethereum’s strategic failure to maintain market share.
Based on these insights, Thielen recommends caution when it comes to Ethereum.
“Ethereum’s fundamentals are weak and not yet reflected in the price of ETH, so it would be more comfortable to remain short ETH right now than long BTC,” Thielen said.
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