Is Ethereum Overvalued, Similar ‘To Meme Coins Like Shiba Inu’?
February 21 2024 - 5:00PM
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A crypto investor, Fred Krueger, thinks Ethereum is overvalued at
spot rates. Referring to X, Krueger added that Ethereum
supporters are “detached from reality” after ETH, the native
currency, recently broke above $3,000. The investor pointed to the
general declining on-chain activity, fierce competition from
alternatives like Solana and Avalanche, for instance, and
regulatory uncertainty that makes holding the coin risky. Ethereum
Is Slow And Usage Is Shrinking Krueger argues that Ethereum’s
on-chain transactions could be faster and cheaper. In the current
landscape marked with scalable and low-fee alternatives, either
built on Ethereum or existing as independent chains, the chain’s
challenges no longer justify ETH trading at spot rates of about
$3,000. Related Reading: AVAX Slips, Adding Tension To $365
Million Avalanche Token Unlock Drama Beyond scaling and throughput
challenges, the investor also refers to the sharp decline in daily
active users (DAUs) on the mainnet. Since 2021, Ethereum and
altcoin prices have peaked, and active DAUs have fallen from around
120,000 to approximately 66,000 in February 2024. Though
network supporters said there had been developments like layer-2
platforms like Arbitrum pinning their security on Ethereum, Krueger
notes that even the most active and largest protocols by total
value locked (TVL) have seen user losses. To illustrate, Uniswap
V3, the third version of one of Ethereum’s largest decentralized
exchanges, Uniswap, now records around 16,000 daily active users,
significantly lower than previous years. Alternatives Like Solana
Offer Better: Is ETH Expensive? The investor argues that the
decline in DAUs, pointing to active usage, sharply contrasts with
Ethereum’s rising market capitalization and spot rates. In
Krueger’s opinion, this emerging state of affairs is why Ethereum
has become a bloated “meme coin like Shiba Inu,” looking at its
high market cap. It in the investor’s assessment that faster and
cheaper alternatives like Solana, Avalanche, and Near Protocol
offer better value for specific use cases like decentralized
finance (DeFi) and games. Related Reading: Bitcoin FOMO
Hasn’t Spiked Yet: Green Signal For Rally To Continue? Krueger also
took issue with the lack of regulatory clarity on Ethereum. The
United States Securities and Exchange Commission (SEC) recently
approved the first spot Bitcoin exchange-traded funds (ETF) batch.
Primarily, this is because SEC officials recognize Bitcoin as a
commodity. Gary Gensler and the SEC have failed to classify ETH in
the same category as BTC. Accordingly, though the broader crypto
community is optimistic about the eventual authorization of a spot
Ethereum ETF, Krueger thinks it is unlikely. Still, time will only
tell how Ethereum and its market valuation will evolve in the
coming months. Supporters are optimistic, despite criticism, that
rising adoption and ETH’s deflationary nature will lift prices
towards 2021 highs of $5,000. Feature image from DALLE, chart from
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