ETH Charts to Watch
More than a year ago, I wrote an issue of the Digest called “The only ETH Chart to Watch.” Things have changed since then. Given the intensifying Merge trade, I think it’s worth reflecting on my earlier thoughts.
Let me bring that chart up once again. It’s ETH priced in BTC.
ETH / BTC. Source: CoinGecko.
Notice how ETH hasn’t even reached its 2017 all-time-high against BTC. In 2017, the majority of the speculative activity, especially around primary sales (ICOs), was on Ethereum. The 2020-2022 bull run was different.
Look at the chart below, which reflects the total value locked (TVL) on Ethereum as a share of the TVL in the entire space. Ethereum dominance has been shrinking.
Ethereum TVL (pink) vs. other networks. Note that a spike in TVLs is due to Terra going bust. Source: DefiLlama.
It’s important to understand that the Merge will not make Ethereum faster. The throughput will remain roughly the same, meaning that gas wars aren’t going anywhere. It’s not necessarily bad, though. The more people pay to push their transactions through, the less ETH is available.
Daily ETH burned. Source: Etherscan.
At the same time, low throughput will likely put a cap on ETH price due to transaction pricing. Although it’s fixed in ETH terms, ETH price costs can quickly make them prohibitive. If ETH is too expensive, transactions will also become expensive, even if gas prices don’t skyrocket (and on a bull market, they will).
This means that many new entrants will not likely interact with Ethereum. They now have many Layer-2 solutions like Polygon and Arbitrum, alternative networks like Solana and Cosmos, and upcoming chains like Aptos. That means Ethereum’s share of the total TVL will likely slide.
Why am I telling you all this? I have a horse in this race, a sizable bet on ETH. Yet, I say the Merge isn’t going to make Ethereum “win,” what’s the catch?
There’s none. The market is driven a lot by narratives, and the Merge is the hottest right now. If it’s going to happen, the improvements won’t be outright visible to an average user, but they should matter for a longer timeframe. Meanwhile, other networks will likely take the spotlight.
A good thing for ETH after the Merge is that it will become environmentally friendly and, therefore, more accessible for institutions. Clawing back dominance would take much more time.
Disclosure: The author of this newsletter holds ETH. Crypto Briefing and members of the research team hold some of the Pick of the Month coins mentioned in the table above. Read our trading policy to see how SIMETRI protects its members against insider trading.
