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ETC Group recommended that investors retain Ethereum (ETH), Solana (SOL), and Aptos (APT) due to their strategic significance within the layer-1 blockchain sector in a report dated Oct. 8.
As Ethereum encounters increasing competition from emerging blockchains, the report emphasized the necessity of assessing the current market conditions and long-term performance.
Ethereum encounters obstacles
The report indicated that Ethereum’s underwhelming performance in the third quarter was influenced by three primary factors, with the Dencun update being the most significant, as it considerably reduced gas fees to enhance the efficiency of layer-2 networks.
This resulted in a decline in transaction fees and network activity on the Ethereum mainnet, adversely affecting user sentiment regarding the network.
Moreover, the market downturn in early August, triggered by the unwinding of the Japanese Yen carry trade, led to deleveraging throughout the market, with ETH being among the most impacted.
The report pointed out that the underperformance of spot Ethereum ETFs has also played a role in the quarter’s disappointing results, particularly the weak inflows into exchange-traded funds (ETFs). Since their inception, spot Ethereum ETFs have recorded negative net flows amounting to $546 million, according to data from Farside Investors.
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Notwithstanding these challenges, ETC Group’s analysis indicated that Ethereum appears resilient when assessed year-to-date, maintaining a performance index of 101 in comparison to Solana’s 128 and Aptos’ 78.
The report assessed network dominance using the Comprehensive Network Dominance Index (CNDI), which integrates metrics such as Network Utilization Efficiency (NUE) and Economic Density Index (EDI).
According to its findings, Ethereum continues to be the most dominant network, holding a 45% market share, followed by Solana at 35% and Aptos at 20%. The report attributed Ethereum’s sustained market leadership to its well-established ecosystem and ongoing user engagement, which have bolstered its long-term standing despite intensifying competition.
Solana, Aptos expansion
The report stated that Solana has shown a consistent ability to attract users and developers, evidenced by its bridged net flow growth, which reached $1 billion in the third quarter.
This positions it as an appealing asset for investors, as its growth trajectory is expected to persist in a bullish scenario. However, it noted that Solana’s dominance might be tested in the upcoming months as Aptos gains traction, potentially tempering some of its growth forecasts.
Despite its relatively modest market share, Aptos has demonstrated potential as a contender in the layer-1 arena, exhibiting 23% higher developer activity than the average of other networks. The network has leveraged its success in the blockchain gaming sector and has shown a strong ability to manage high transaction volumes efficiently at low costs.
Nonetheless, the report highlighted that Aptos faces challenges in developer adoption due to the relatively new Move programming language, which has not yet achieved widespread acceptance. In contrast, Solana’s utilization of Rust provides mature tooling and infrastructure, offering it a competitive advantage.
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