Altcoin king ether’s lackluster performance may end year on a high note: Bitwise

Cryptocurrency asset manager Bitwise is making a contrarian bet on ether (ETH-USD), saying the second-largest digital token’s relative underperformance has the potential to reverse by the end of the year.

Ether’s (ETH-USD) lagging performance relative to other major cryptos has been strikingly evident in recent years. From three years ago, ETH shed some 15%, while bitcoin (BTC-USD) climbed 48% and solana (SOL-USD) advanced 12%. And so far this year, ETH gained 8.3%, while BTC jumped 44% and SOL gapped up 35%.

“It’s cool to hate Ethereum right now. I bet this ends up looking silly,” Matt Hougan, chief investment officer at Bitwise, wrote in a memo. To be sure, most Seeking Alpha analysts are actually bullish on ether (ETH-USD), with the average SA analyst rating currently at a Buy.

He attributed ether’s (ETH-USD) subdued performance to uncertainties surrounding the upcoming U.S. presidential election in November, as well as increasing competition from solana (SOL-USD) and other blockchains, challenges with its tokenomics, and a tepid market reaction to the introduction of spot exchange-traded funds in the U.S.

It’s not entirely bleak, though. Most stablecoins are issued on the Ethereum blockchain, over 60% of all decentralized finance (DeFi) assets are locked within Ethereum, and the widely used prediction market, Polymarket, has also chosen to settle on this layer-1 network, the memo said. “Ethereum has the most active developers, the most active users, and a market cap that is 5X bigger than its closest competitor.”

Note that ether (ETH-USD), the largest altcoin by market cap, is the native token of the Ethereum blockchain, a decentralized platform that enables smart contracts and decentralized applications (dApps). Unlike bitcoin (BTC-USD), ether (ETH-USD) actually powers the Ethereum network, facilitating transactions and incentivizing developers to build on its infrastructure.

Ethereum (ETH-USD) is “like the Microsoft (MSFT) of blockchains,” Hougan wrote. “Everyone wants to talk about Google and Slack and Zoom, and with good reason. Each of them has brought game-changing technology to the market. But Microsoft is still larger than all of them put together.”

In any case, as the November election nears, ether (ETH-USD) “looks like a potential contrarian bet through the end of the year,” he contended, adding its “challenges seem existential, and its opportunities are brimming.”

Similarly, Steno Research thinks ether’s (ETH-USD) recent phase of lagging performance may now be drawing to a close, according to a recent report. One reason — the Federal Reserve’s 50-basis-point rate cut earlier this week should result in increased onchain activity, which analyst Mads Eberhardt thinks will benefit Ethereum.

To SA analyst Mike Fay, ether (ETH-USD) might not be as compelling as it was “when rates were 0, and you had the ability to earn yields and use DeFi protocols that offer lending and borrowing,” he said last month in an SA Investing Experts Podcast.

As such, “I’m not sure ETH is going to be number two 10 years from now,” he added.