In an October 8th report, ETC Group advised investors to hold Ethereum (ETH), Solana (SOL), and Aptos (APT) due to their strategic importance in the layer 1 blockchain space.
As Ethereum faces increasing competition from new blockchains, the report highlighted the importance of assessing the market's recent status and long-term performance.
Ethereum faces challenges
According to the report, Ethereum's poor performance in the third quarter was caused by three main factors, the main one being the Dencun update that significantly lowered gas fees to increase the effectiveness of the Layer 2 network.
This resulted in lower transaction fees and network activity on the Ethereum mainnet, negatively impacting user sentiment towards the network.
Additionally, the early August market crash caused by the unwinding of the Japanese Yen carry trade led to market-wide deleveraging, with ETH being one of the most affected.
The report noted that the spot Ethereum ETF's lackluster performance also contributed to the quarter's below-average performance, as was the weakness in spot exchange-traded fund (ETF) flows. Based on data from Pharcyde Investors, the Spot Ethereum ETF has recorded negative net flows of $546 million since its launch.
Despite these setbacks, ETC Group’s analysis suggested that year-to-date, Ethereum has been resilient, maintaining a performance index of 101 compared to Solana’s 128 and Aptos’ 78. .
In this report, we calculated network dominance using the Comprehensive Network Dominance Index (CNDI), which combines metrics such as Network Utilization Efficiency (NUE) and Economic Density Index (EDI).
According to the findings, Ethereum remains the most dominant network with a market share of 45%, followed by Solana with 35% and Aptos with 20%. The report attributes Ethereum's enduring market leadership to its established ecosystem and consistent user engagement, despite increasing competition, which strengthens its long-term position. It is said that it is doing so.
Solana, Aptos growth
According to the report, Solana demonstrated a sustainable ability to attract users and developers based on net flow growth that reached $1 billion in the third quarter.
Therefore, its growth trajectory is likely to continue in a bullish scenario, making it an attractive asset for investors to own. However, the company added that Solana's dominance may be challenged in the coming months as Aptos gains momentum, potentially slowing some of its growth forecasts.
Despite its relatively small market share, Aptos has shown a 23% higher development activity than the average of other networks, showing promise as a competitor in the layer 1 space. The network leverages its success in the blockchain gaming space and has demonstrated a powerful ability to efficiently process large volumes of transactions at low cost.
However, the report notes that Aptos has faced hurdles in developer adoption due to the relatively new Move programming language, which is not yet widely supported. In contrast, Solana's use of Rust provides mature tools and infrastructure that give it an edge.
