Ethereum’s Market Dominance Plummets to 2020 Lows

Ethereum Faces Its Worst Quarter Yet

Ethereum (ETH), long considered the “King of Altcoins,” is facing one of the toughest periods in its history.

The first quarter of 2024 has been particularly brutal, with ETH losing over 44% of its value. At the time of writing, Ethereum’s market dominance stands at just 8.5%, according to CoinMarketCap—a level not seen since 2020.

CryptoQuant CEO Ki Young Ju attributes this downturn to an unprecedented wave of sell-offs, which has pushed ETH prices into a steep decline.

As Ethereum struggles, market analysts and developers have taken to social media to debate the reasons behind its fall.

Layer 2 Growth Hurts ETH’s Market Presence

Ethereum’s struggles may, ironically, be linked to the success of its own Layer 2 (L2) solutions.

According to analyst Camila Russo, L2 networks—designed to scale Ethereum and reduce congestion—have diverted transaction activity away from the main network.

While these improvements make Ethereum faster and cheaper to use, they do not necessarily boost the price of ETH, since many Layer 2 solutions operate independently.

Criticism of Ethereum’s Governance and Technical Issues

Some developers argue that Ethereum’s core vision has been compromised, raising concerns about its long-term viability.

• Developer Uncle Rockstar called Ethereum an “absolute cesspit”, claiming the blockchain has strayed from its decentralized ideals.

• He criticized Ethereum’s governance structure, arguing that it benefits insiders and co-founder Vitalik Buterin more than the broader ecosystem.

• Technical concerns, particularly post-Merge updates, have weakened Ethereum’s monetary policy, reducing confidence in ETH’s long-term value.

Ethereum Lacks a Strong Narrative

Blockstream advisor Tür Demeester believes Ethereum is struggling because it lacks a compelling narrative.

While Bitcoin has solidified its identity as “digital gold”, Ethereum’s shifting focus—from smart contracts to DeFi, NFTs, and staking—has left investors uncertain.

Demeester referenced a 2017 market prediction, stating that cryptocurrencies relying on hype rather than clear utility often struggle over time.

Regulatory Concerns & Institutional Hesitation

Ethereum also faces regulatory uncertainty that could further harm its adoption.

• Unlike Bitcoin, which is recognized as a commodity, Ethereum’s staking mechanisms could lead to a securities classification—a move that would create major compliance challenges.

• Analyst Francisco Quartin de Macedo argues that Ethereum’s monetary policy has been unclear since The Merge, creating concerns about potential inflation rather than the expected deflationary benefits.

• Ethereum lacks the institutional support Bitcoin has, as seen with the BTC ETF’s success, which has strengthened Bitcoin’s credibility while leaving Ethereum behind.

Macedo also pointed out that Ethereum’s Layer 2 ecosystem is highly fragmented, making it less attractive for long-term investors compared to Bitcoin’s simpler and more unified structure.

As Ethereum struggles to regain momentum, the question remains—can it recover, or will its dominance continue to fade?