The third quarter revealed a difficult situation for the crypto market, with low on-chain fees, Bitcoin’s growing dominance, and Ethereum battling inflation and underperformance.
The identity of Ethereum (ETH) is changing as it moves from a deflationary to an inflationary model, and its role as a cryptocurrency is being questioned amid the rise of layer-2 solutions and the dominance of Bitcoin (BTC). Masu.
In an October 4th X article, Lucas Automurro, head of research at IntoTheBlock, said that although on-chain fees saw a slight recovery in September, Ethereum continues to grapple with significant fee reductions that are hampering performance. He pointed out that it was.
“Although fees recovered slightly in September, Ethereum’s tendency to sharply lower fees remains the main reason for ETH’s poor performance, as the market effectively rejects the theory of ETH as money. Masu.”
Lucas Automurro
Meanwhile, even though Bitcoin’s price remained largely stable throughout the quarter, its market share rose to its highest level since April 2021, Automurro said, while Ethereum and altcoins hit new yearly lows. He added that he is continuing. Meanwhile, Bitcoin fees plummeted 86% this quarter, reflecting that the market seems unfazed by this decline.
“The divergence in the prices of BTC and ETH suggests that one is valued as money, while the other is more closely tied to cash flow, even as fees for both have plummeted.”
Lucas Automurro
The Dencun upgrade that introduced EIP-4844 had a significant impact on the Ethereum economy. Although Layer 2 trading volumes have increased, mainnet fees have reached an all-time low, raising concerns about Ethereum’s deflationary story. As fees decrease, the amount of ETH burnt decreases, Automurro noted, and “the Ethereum community has been consistently focused on its previous deflationary path, leading to a return to inflation.”
Other than that, the ETH/BTC ratio has fallen by nearly 30% since the Dencun upgrade, which Automurro said is indicative of Ethereum’s “identity crisis.” At the time of writing, Ethereum is trading at $2,390, more than 50% below its all-time high three years ago.
