Ethereum may just be the biggest underachiever of the bull run so far.

ETH -- and ETH-aligned assets -- have seemed to lag well behind the likes of Solana through most of the bull run. And, with that, the vibes and narratives have shifted away from Ethereum and towards competing platforms.

However the unexpected approval of a spot ETH ETF may signal a change of fortunes for the second-largest cryptoasset.

And that's what I want to think about today.

Just why has Ethereum performed so badly in the bull run this far, and will the ETF be enough to turn things around?

Disclaimer

As always, none of this should be taken as investment advice. Nor is it a suggestion or recommendation to buy ETH or any other cryptoasset. And remember, if you do choose to invest in crypto, it is very risky and you can always lose what you put in.

With that out the way, let's get into it.

Why The Hard Times?

Over-performed In Bear Market

Price and narrative are deeply entwined and highly reflexive.

Price action drives narratives, and narratives drive price action.

When an asset's price changes, people like to attribute that change to a particular reason or narrative. And that narrative can attract additional capital to amplify the move.

In the right circumstances, this creates a great flywheel effect. The asset's price will keep moving in one direction, and the vibes around the asset will strengthen.

This is why we need to look back to the bear market to understand the beginning of Ethereum's troubles.

See, Ethereum held up relatively well throughout the bear, outperforming the vast majority of cryptoassets.

Crucially, it also bottomed earlier than most -- hitting its lowest point during the 3AC crash in June rather than the FTX collapse in November.

That meant ETH felt like it had more momentum than most assets through the bear, and the vibes around it were generally good. But there weren't so many people around at that time to appreciate this and buy in, so the flywheel never got going.

At the same time, the relative outperformance in the bear meant ETH was closer to its 'fair' price compared to most other cryptoasset. As markets improved, it had less ground to recover and less room to run. Once again, the flywheel wasn't running because there wasn't sufficient price action to drive it, even though overall market sentiment had improved.

Compare that to one of the cycle's more hyped assets, like Solana.

Solana had been beaten into the dirt during the bear. Its association with FTX meant it sold off hard, generating the narrative that Solana was dead. Some projects even abandoned the chain altogether, furthering that sense of despair.

All of this meant Solana was starting from a much lower place as we entered the bull market. SOL's price was dislocated so far from a fair value that it was able to rally hard as soon as the market sentiment turned. That created a sense of resurgence, which was backed up by Solana's true believers delivering new developments and rebuilding the ecosystem.

The narrative was therefore easy to build, easy to believe, and easy to buy into. And that's exactly what many investors and traders did. They piled into Solana and drove SOL ever higher.

For Solana, the flywheel was firmly in motion as the bull market began, while Ethereum seemed to be stagnating.

If ETH had performed worse through the bear and therefore had more room to recover, the vibe around it would probably be quite different today, even if the price ended up in more or less the same place.

But, it had the wrong price action at the wrong moment in time.

As it happened, Ethereum wasn't able to capture any momentum or attention as the bull run began, rendering it an also-ran in a fickle and forgetful market. A short -- and fairly understandable -- period of underperformance was all it took for the bad vibes to begin and a sense of malaise to set it.

The Narrative Squeeze

Worse still, the assets that experienced the biggest flywheel effect in the early bull market were the worst ones from Ethereum's perspective.

Ethereum has always occupied a slightly strange place in the market and has had a difficult time positioning itself properly.

On one hand, it's a smart contract platform and therefore ostensibly a tech play in competition with other platforms like Solana or Avalanche.

On the other hand, it's very focused on robustness, reliability, decentralisation, and creating a strong and sound money. That places it firmly in competition with Bitcoin.

It also creates a sense of conflict in Ethereum's design as it struggles to bring these competing aims together.

It must be relatively conservative to satisfy its Bitcoin-like desires. That leaves it unable to adopt an aggressive, high-throughput/low-fee design like many other smart contract platforms. And yet it will never be as simple or conservative as Bitcoin itself.

Ethereum must fight on both fronts with a hand tied behind its back. It's already at a disadvantage.

And then, as the bull run began, it was Bitcoin and Solana that performed the best and gained the most attention. They took narrative dominance, squeezing Ethereum on both sides.

The idea of Solana's resurgence made people think that it could steal Ethereum's thunder as the leading smart contract platform. Its low fees and -- initially -- superior user experience made it feel like the future.

Why would anyone want to build on or use Ethereum if they could do the same sort of thing in a faster, cheaper, simpler -- and altogether better -- environment? Especially when most people don't care about 'money-ness' and decentralisation like Ethereans and Bitcoiners do.

At the same time, Bitcoin was being propelled by both ETFs and its burgeoning ecosystem that consisted of Ordinals, fungible tokens, and proto-L2s.

The ETF narrative gave a sense that bitcoin was the only serious asset in crypto that institutions could get behind. The 'digital gold' argument seemed to be finally paying off as billions of dollars flooded into the newly launched funds.

Meanwhile, the growth of Ordinals proved that Bitcoin could be used for more than just money. Like Ethereum, it might also be a foundation for more complex computations and transactions.

If it could do that while being more conservative and more economically sound, then what would be the point of Ethereum? Surely anyone who truly cared about decentralisation and robust, reliable blockchain designs would pivot toward Bitcoin?

And if all that wasn't bad enough, Ethereum was even suffering in its relatively new 'modular' narrative as well.

Ethereum is supposed to become the base layer of an expansive, interconnected universe of chains and higher-layer scaling solutions. But that wasn't its original plan and it's slowly moving in that direction, one upgrade at a time.

But then Celestia launched, a new modular chain specifically built to serve the kind of role Ethereum will eventually fulfil. And, like Bitcoin and Solana, it performed very well financially and narratively in the early days of the bull market. Once again, Ethereum was made to look a bit pointless.

Almost every Ethereum narrative was being undermined simultaneously, compounding the lingering negativity that came from its own mediocre price action.

The excitement and attention had all moved elsewhere, and Ethereum was left feeling like a purposeless relic of the past.

In my opinion, this narrative assault is the primary reason why everyone has been so down on Ethereum so far. Its very existence, its reason for being, had been called into question. And, without a surge in activity or price, it wasn't able to give a convincing answer.

A Lack Of Buyers

Another contributing factor to Ethereum's lacklustre price action (and resultant negative vibes) is the lack of buyers coming to support the price.

Again, this is a case of Ethereum's previous strength coming back to haunt it.

In the previous cycle, Ethereum was the consensus bet.

ETH was almost the default asset for anyone serious about crypto.

Bitcoin, the former consensus play, had started to feel a little too old and out of touch. It was generally viewed as a played-out pet rock with relatively little growth potential compared to other cryptoassets.

Meanwhile, ETH was at the centre of a rapidly expanding ecosystem and was touted as 'the future of finance'. And though there were other platform plays like Solana with even more growth potential, only Ethereum came close to matching Bitcoin's longevity and dependability. From a risk/reward standpoint, ETH was a clear best.

For once, Ethereum's usually conflicting narratives seemed to synergise to make it the perfect play for anyone bullish on crypto.

You knew it wouldn't let you down or run into fundamental problems, but it was still exciting and rewarding.

At the time, this was great for ETH -- and it probably contributed to its outperformance in the bear. But fast forward to today and it's become a problem.

Almost everyone who has been involved in crypto for more than one cycle already has ETH exposure. And, if they don't already own ETH, it's likely because they have a clear reason not to -- usually because of irreconcilable philosophical differences.

Put another way, most people in crypto either already own ETH or never will.

As the bull run began, the people who already held ETH weren't given a reason to buy more. Why would they prioritise an asset they already held when so many under-owned assets looked so attractive?

If anything, existing holders were likely to sell some of the ETH they owned for assets with more short-term promise, resulting in even worse price action.

With little support from crypto-natives, ETH needed crypto-tourists and newcomers to step in. But the market wasn't flooded with new capital as many expected. In fact, we're still waiting for general interest in crypto to pick up and for the next cohort of users and investors to arrive.

Without them, it's understandable that ETH would struggle with a lack of buyers.

To start performing better, ETH needs to give existing holders a reason to increase their allocation or find brand-new buyers entirely... Hold onto that thought, we'll come back to this in a bit.

Dilution Across Assets

Making matters worse, the few dollars that did enter Ethereum's atmosphere were scattered across multiple assets.

This is because there are now a plethora of Ethereum-aligned assets that could be viewed as 'ETH beta' -- alternatives that should outperform ETH itself in a bullish environment.

Therefore, anyone who is bullish on Ethereum must decide the best and most profitable way to express that view.

For instance, an investor could opt for Layer 2 tokens like OP and ARB. Or they might consider staking-related tokens like LDO. Or potentially tokens from Ethereum's DeFi, NFT, or RWA ecosystems, like UNI, BLUR, or ONDO. Perhaps they'd even like Ethereum-based memecoins such as PEPE or MOG.

There are so many different avenues to go down, and so many different assets to consider if you're bullish on ETH.

Even if you want to keep things simple and just own ETH, there's still a decision to be made about whether it's better to own native ETH, liquid-staked ETH, or liquid re-staked ETH.

All of this creates decision fatigue, which could put some investors off.

Worse, it causes any incoming funds to be diluted across a variety of assets, reducing the stimulative effect that cash could have.

ETH isn't entirely alone in suffering from this. After all, an investor might have to consider the pros and cons of buying SOL over BONK or WIF or PYTH. But the ecosystem around Ethereum is much more developed with many more options, and so the dilutive effect is much more significant. And that certainly didn't help when Ethereum was already on the back foot.

Security Concerns

Adding to all of this was the concern that ETH would be declared a security by the SEC.

I'm sure you've seen the rumblings about investigations into the Ethereum Foundation and concerns about PoS making ETH a security. Those fears would certainly have weighed on ETH and hampered its performance.

It was going against years of conventional wisdom that said ETH was a commodity and therefore safe from the SEC's attacks. Now markets had to consider and price in worst-case scenarios like Ether being delisted from major exchanges.

Plus, it threatened to undermine Ethereum's appeal to institutional investors. After all, they probably wouldn't want to buy into something with so much uncertainty around it. And that's if they could access it at all without an ETF wrapper.

See, once the Bitcoin ETF was approved, people automatically assumed an ETH ETF would follow. It may have taken another lawsuit to force the SEC's hand, and so it could have taken a year or more to become reality, but it looked pretty certain. That gave ETH a tiny glimmer of light at the end of a very long tunnel.

But the security concerns dashed those hopes almost entirely. Ethereum's gloomy and pessimistic atmosphere grew ever darker.

It felt like Gary Gensler and the SEC were kicking something that was already down.

Marketing Problems

The final thing I wanted to mention was the difficulty Ethereans seem to be having in campaigning on Ethereum's behalf.

There are two prongs to this.

First, a lot of Ethereans have migrated from Twitter to Farcaster over the past year or so. Even if they haven't transitioned fully, they're spending much less time on Twitter.

And yet Twitter remains the focal point of most crypto culture.

With fewer Ethereans about to argue their case and get the message across, we end up experiencing a slightly warped version of reality that is shaped and dominated by Ethereum's detractors.

The negatives are presented much more frequently than the positives, which both contributes to and exaggerates the sense of pessimism around Ethereum.

The second is about Ethereum's research-heavy mentality that some find off-putting.

When Ethereans are see discussing things on Twitter elsewhere on social media, their conversations are often un-relatable and jargon-heavy. It leaves potential users feeling alienated and maybe even annoyed.

For instance, users might understandably complain about relatable problems, such as high transaction fees that make small trades impossible. But then see prominent Ethereans throw around incomprehensible and slightly ridiculous terms like 'Proto-Danksharding'. It makes them feel like their problems aren't being taken seriously.

Now, I don't want to be too critical here. Ethereum -- and blockchains in general -- are pretty complicated and involve lots of difficult tradeoffs that the average user won't appreciate.

But equally, Ethereans will never win the narrative war if they continue as they are. As difficult as it may be, they need to find a better way of acknowledging the complaints of average users, whilst also explaining in simple terms why certain design decisions have been made and what is being done to help.

To be honest, that may not be possible. Most people don't want to understand why things are the way they are, or they don't have time to learn it. Instead, they'll just assume Ethereum is clunky and expensive because it uses old and outdated technology. And they'll assume prominent Ethereans simply don't care because they are rich and out of touch with normal people.

In the long term, this probably isn't a big issue. Eventually, if Ethereum's thesis is correct, people will be using low-fee L2s without a care in the world. They probably won't even know they are using an L2, let alone an L2 within the Ethereum ecosystem.

But, until all the difficulties have been abstracted away, users will notice Ethereum's shortcomings, and they will complain about them. And those complaints will continue to contribute to the negative atmosphere around Ethereum and continue to make Ethereans look out of touch. Unless Ethereans can streamline their messaging enough to break through the noise and explain their approach in a clear, understandable, and understanding way.

Will The ETF Change Things?

Together, all of those factors have contributed to ETH's underperformance and Ethereum's gloomy atmosphere over the past few months.

So, the question now becomes, can the ETF help to change this?

I think it will. Or, at least it should, as long as broader circumstances and macro trends don't get in the way and derail things.

That's because the ETF approval will address many of the reasons for Ethereum's underperformance.

Security Concerns Cleared

First of all, the ETF approval clears away most of the concerns and uncertainty about Ethereum being declared a security.

There's still a chance that the SEC will take some action against staked ETH, but the implications of that wouldn't be as severe as declaring ETH itself a security. Therefore, the financial downside is much smaller.

And, besides, even that threat looks relatively unlikely now too.

The ETF approval appears to be a political move from the Democrats as they try to position themselves ahead of the election.

If they are genuinely looking to court crypto voters -- or at least, not scare them off -- then it would be silly to pursue aggressive actions like attacking the second largest cryptoasset.

As a result, Ethereum is suddenly unburdened and a major argument for avoiding ETH has been invalidated.

Brings New Buyers

The ETF will also help solve Ethereum's lack of buyers.

Not only will it open Ethereum up to an entirely new and incredibly wealthy pool of institutional investors, but it gives crypto-natives a reason to start buying ETH again.

Many crypto-natives will have been caught offside by the ETF approval. They will have sold ETH for more exciting and better-performing assets earlier in the bull run. But now they are underexposed and will want to correct that.

At the same time, traders and short-term investors may flood back to ETH as they try to front-run and price in the ETF launch.

Then, once the ETFs are live, TradFi dollars will dominate the price action.

I don't expect these funds to perform as well as the Bitcoin ETFs, but I think their performance and impact on ETH's price should be relatively similar when you scale by the market caps.

And, over the long term, the ETFs open the door for vast quantities of wealth to flow into ETH and the Ethereum ecosystem.

In short, the ETFs should attract new buyers and new dollars to Ethereum over both short and long time frames. And that's exactly what ETH needs to start moving again.

Resets The Narrative

We've already seen how price action and narratives are tightly coupled.

If the ETF excitement and front-running do cause ETH to outperform other assets in the short term, it could be enough to get the narrative flywheel running.

At the very least, a period of positive price action would reduce concerns about competitors like Solana and Bitcoin encroaching on Ethereum's territory. It's silly that price action could shape opinions that much, but it is what tends to happen.

But the biggest narrative benefit of the ETF approval is that it reminds people how special and distinct Ethereum is compared to every other 'altcoin'.

At the end of the day, only two cryptoassets are considered dependable and respectable enough to have ETFs anytime in the near future. This tells us that, alongside Bitcoin, Ether is the only institution-friendly cryptoasset.

And, unlike Bitcoin, which continues to be pitched as digital gold, Ethereum is synonymous with tech crypto. Therefore, anyone in the TradFi world who wants exposure to the most dynamic and high-potential segment of the crypto industry will have to buy ETH.

Again, we're seeing that blend of time-tested dependability and excitement -- the same blend that previously made ETH the default asset for crypto-natives. Safe enough to invest in, but still capable of providing massive returns.

With the right marketing, Ethereum could even become a more popular bet than Bitcoin among traditional investors.

Bitcoin has a massive head start and much better brand recognition than Ethereum, but it also has a less interesting story.

Most people don't particularly care about gold, so they may not care about digital gold either. But a lot of people like tech plays that are growing fast and generating real returns -- which sounds a bit more like Ethereum.

Still, TradFi types will already consider Bitcoin to be an exotic asset with lots of risk and lots of potential, so perhaps they won't want to push much further down the risk curve -- even if the returns could be slightly higher.

Therefore, I think the chance of ETH becoming the default asset again is relatively low -- at least in the near term. But, with enough time and clear messaging, it's far from inconceivable.

Even if that never happens, the ETF launch will be a huge moment -- almost a reset point -- for Ethereum and its narratives.

At the very least, this gives Ethereum a point of differentiation from other smart contract platforms and provides some breathing space after Solana's relentless onslaught. It should help ETH to rise alongside Bitcoin and Solana, rather than being eaten up by them. And, after a lengthy period of losing ground to the competition, I think a lot of Ethereans would consider that a win.

Professional Marketing

The ETFs may even help Ethereum's messaging problems.

Once the ETFs launch, it will be on the ETF issuers to market their products to potential customers. And that means they will need to start explaining what Ethereum is in simple terms -- without technical jargon and silly terminology.

While it may come a bit too late for cryptonatives, it should mean TradFi types have a slightly better introduction to Ethereum. And, who knows, maybe some Ethereans will absorb some of the marketing terms and improve their own promotional efforts as well.

Reduces Dilution

The ETFs should also help with the dilution problem.

Of course, crypto-natives will continue to distribute funds across a range of Ethereum-aligned assets in the hope of finding the greatest returns.

However, the ETFs themselves will be constrained to vanilla ETH. All of the flows will go to Ether alone. And, depending on how successful the launch is, it could be a lot of money funnelling into one asset -- which could counteract the dilution among crypto-natives.

But Are There Risks?

From all this, we can see that the ETFs will address virtually every problem that has contributed to Ethereum's underperformance and negative outlook.

Some of the fixes may take time to play out -- especially things like marketing changes and the introduction of new, institutional investors -- but we should start to feel the benefits over the next 12 or 18 months.

And, if that happens, then it's very reasonable to think the ETFs will wake ETH from its slumber, boost prices, and bring an altogether more positive attitude to the space.

But, of course, nothing is guaranteed.

There are many ways that this could go wrong and Ethereum could continue to flounder.

Today, people are predisposed to believe anything negative about Ethereum. That's simply what happens when bad vibes linger this long. And so it will be at particular risk of any downside surprise or even stagnant price action when these funds launch. After all, that would confirm everyone's existing bias that ETH's time has passed and Ethereum is dying.

In a worst-case scenario, that downbeat attitude could even leak from crypto-Twitter into the wider world and contribute to weaker demand for ETFs. I don't necessarily expect that to happen, but people aren't always rational and sentiment can play a big role in investment decisions -- even for the supposed 'smart money'.

The obvious short-term risks are ETF inflows being much smaller than expected or Grayscale outflows being larger than expected. Either way, ETH would probably suffer quite significantly.

Longer-term, the big issue would be Ethereum failing to establish itself as an interesting or worthwhile investment for TradFi. They seem to have a degree of interest in Bitcoin, and so we're all assuming they'll like Ether as well, but we don't really know that yet. There certainly isn't the same clamour for ETH ETFs as there was for Bitcoin ETFs -- though that's to be expected. But if Ethereum can't catch on or generate any excitement once ETH is on the main stage and the marketing materials are out, then it could be in trouble.

Does Any Of This Really Matter?

The final point that's worth thinking about is 'does any of this matter?'

So what if ETH's price doesn't do so well?

Ethereum works the same regardless of ETH's price. It could be worth $10 or $10,000 and the network would function in the same way -- albeit with a different level of security.

Plus, this is all very focused on the short-term, and Ethereum is all about building sustainably with the long game in mind.

Price action, vibes, and narratives are largely noise. They don't make a huge difference in the day-to-day running of Ethereum.

However, I probably wouldn't be writing this if that was all I thought. After all, I tend not to focus on short-term price action here.

The reason I think this stuff is important is because the narrative and vibes around protocols like Ethereum will play a role in its future success. What seems like irrelevant noise today can, eventually, become a pattern and set a trend.

Nobody will want to build on a chain that is perceived to be dying. Nobody would want to use that chain either -- especially if fewer builders appear to create exciting new opportunities.

It won't happen overnight, but if Ethereum cannot start to perform a bit better -- if it cannot change its narrative and start to gain some momentum -- then it will leak more and more activity to competitors.

Its powerful network effects, which some might consider almost insurmountable today, would be slowly eroded.

The threat isn't immediate, and the risk is relatively low -- for now.

Contrary to popular perception, Ethereum continues to lead the competition in virtually every meaningful metric. The very fact that ETH is the lone altcoin to have an ETF shows just how far ahead of the competition it is in some regards. Platforms like Solana are likely years away from similar mainstream financial products.

But Ethereum cannot be complacent. It must not squander its lead. Not while the crypto industry is so new and set to grow so dramatically in the years to come. Things can -- and likely will -- change much faster than many anticipate.

Ethereum's head start, network effects, and long-term philosophy mean it has a great chance at being the dominant crypto platform for the foreseeable future.

But its success is certainly not guaranteed. And, whatever it does, Ethereum cannot afford to let the bad vibes linger much longer. The upcoming ETF launch may be the best opportunity to dispel them once and for all.

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Disclaimer: Anything expressed here is my own opinion stated for informational and educational purposes; nothing I say should be taken as investment or financial advice. Many projects mentioned on this channel are highly experimental and therefore come with risks. Please evaluate your own risk tolerance before experimenting with these projects, and remember that investing in cryptoassets is extremely high risk and could result in total loss of capital.

I may own some of the cryptoassets mentioned.