Ethereum Struggles with 'Middle Child Syndrome,' Trails BTC and SOL in YTD Returns: Zaheer Ebtikar

Ethereum's (ETH) has struggled this cycle amid record-high FUD, and investors' attention shifted elsewhere.

While Bitcoin [BTC] and Solana [SOL] investors celebrated gains of 130% and 850%, respectively, in 2023,本線コピー

Ethereum [ETH] investors had to make do with only 8% gains YTD (year-to-date). This lackluster performance has not gone unnoticed by the crypto community.

According to Zaheer Ebtikar of crypto hedge fund Split Capital, ETH has lagged behind others due to ‘middle child syndrome.’ In a recent Substack post, Ebtikar explained that investors, both institutional and private capital, have shifted their attention elsewhere.

“$ETH very much struggles with middle-child syndrome. The asset is not in vogue with institutional investors, the asset lost favor in crypto private capital circles, and retail is nowhere to be seen bidding anything at this size.”

Investors abandon ETH

Among the crypto majors, ETH offered investors only 8% on a YTD (year-to-date) basis, compared to double digits seen in Bitcoin [BTC] and Solana [SOL].

Ebtikar linked the underperformance to investors’ focus on BTC and other ETH competitors like SOL and Sui [SUI].

“The narrative has shifted from ‘ETH everything’ in 2021 to ‘BTC and other crypto’ in 2022 and 2023. Within the ‘other crypto’ category, there have been clear favorites such as $SOL, $SUI, and $GRT.”

The executive noted that there are three capital sources in the crypto space: institutional (through ETFs/futures), private capital (liquid funds, VCs), and finally, retail. But only the first two mattered at the moment.

“We have 3 sources of capital in crypto: institutional (ETFs/futures), private (funds, VCs), and finally, native (retail). Only the first 2 mattered in this cycle. And $ETH is too large for native capital to support while simultaneously being able to support other index assets like $SOL and other large caps like $TIA, $TAO, and $SUI.”

He added that institutional capital was heavily focused on BTC (through ETFs). ETH ETFs, on the other hand, have seen net outflows of $546 million since they debuted in July.

“Institutions are piling into $BTC (through ETFs) while simultaneously pulling money out of $ETH (ETFs saw net outflows of $546 million since debut in July, underscoring the lack of interest).”

According to Ebtikar, institutional interest in BTC was largely due to the approval of ETFs in the United States, which has helped the premier cryptocurrency to decouple from the broader market.

On the other hand, Ebtikar stated that private capital viewed ETH as overvalued and redirected capital to other ETH competitors perceived as undervalued, such as SOL, Celestia [TIA], and SUI.

“$ETH is the only asset that is too large for native capital to support while simultaneously being able to support other index assets like $SOL and other large caps.

Coinbase analysts also echoed the above sentiment in their September report.

“The narrative has shifted from ‘ETH everything’ in 2021 to ‘BTC and other crypto’ in 2022 and 2023. Within the ‘other crypto’ category, there have been clear favorites such as $SOL, $SUI, and $GRT.”

Source: SOLETH ratio, TradingView

The SOLETH ratio, which tracks SOL’s value relative to ETH, has exploded since last year, cementing Ebtikar’s thesis that investors might have rotated to SOL from ETH.

That being said, Ebitaker also acknowledged that ETH was the only altcoin with an approved ETF in the US.

“As the only altcoin with an ETF in the US, $ETH could see renewed interest, especially from institutional investors, from 2025. Likely ETF buyers, changes within the Ethereum Foundation, and Trump.”

At press time, ETH was valued at $2.4k and has been consolidating between $2.3K and $2.5K since the beginning of October.

Source: ETH/USDT, TradingView

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