What is Behind Ethereum’s Dwindling Fortunes?

• Ethereum’s market share has declined in the past few months.
• Users are migrating from Ethereum to newer blockchain platforms.
• Ethereum lowered transaction fees by 99% since the Dencun upgrade.

Ethereum’s market share has decreased in recent months, with TradingView’s data showing that the leading altcoin’s market dominance has fallen to 14.24% at the time of writing, its lowest point since June 2022. Reports also show that Ethereum’s share of trading volume on decentralized exchanges dropped from 42% in 2022 to 29% this year.

Analysts point to several factors for Ethereum’s declining performance, including a decrease in network revenue and growing competition from other blockchains. Researchers have also noted that many developers are moving to faster networks, likely attracted by their higher transaction speeds compared to Ethereum’s.

Alongside competition from other blockchains, research shows that newer blockchain protocols like Solana, Aptos, and Sui are attracting more users and gaining popularity. From observation, many users patronizing the newer blockchains migrated from Ethereum, leading to a drop in the latter’s network activity and revenue.

Apart from the regular blockchain users, developers are choosing to build new tokens on these newer and faster blockchains, mainly because Ethereum has become congested and more expensive to use. Interestingly, Ethereum’s recent Dencun upgrade has had a counterproductive effect on the blockchain network. By lowering fees, the upgrade attracted many layer-2 solutions to the network to the point of overcrowding. 

Meanwhile, several analysts believe that growing competition among the layer-2 protocols and their quest to attract users have led to Ethereum lowering transaction fees by 99% since the Dencun upgrade. As a result, Ethereum’s challenges have become more complicated due to external and self-inflicted factors. 

Read also: Ethereum Could Plummet to $1,200 by December, Analyst Warns

Furthermore, researchers observed that Ethereum is losing its grip as the top blockchain for developing smart contracts. According to a recent VanEck report, many innovative, non-financial crypto projects, like Helium and Hivemapper, reside on more advanced blockchains. That reflects how Ethereum is losing its dominance as a platform for speculation and losing the option to host tokens that appeal to speculators.

Significantly, Ethereum’s market decline accelerated in the second half of 2024. The leading altcoin’s market dominance has been falling rapidly since June, dropping from 18.80% mid-year to 14.24% at the time of writing. Analysts believe how Ethereum addresses these challenges will be critical to the blockchain’s future status as the leading smart contracts platform in the cryptocurrency market.