Is Ethereum underperforming? VanEck executive defends its strong economic modelAmidst growing criticism of the Ethereum blockchain and its underwhelming performance this year, Matthew Sigel, Head of Digital Assets at VanEck, has come out in defense of the network, citing its robust economic model. Even after the launch of a spot Ethereum ETF in July 2024, ETH price has been criticized for failing to attract enough interest
Is Ethereum underperforming? VanEck executive defends its strong economic model
Amidst growing criticism of the Ethereum blockchain and its underwhelming performance this year, Matthew Sigel, Head of Digital Assets at VanEck, has come out in defense of the network, citing its robust economic model. Even after the launch of a spot Ethereum ETF in July 2024, ETH price has been criticized for failing to attract enough interest.
VanEcks Matthew Sigel expressed frustration with the recent criticism directed at Ethereum, calling it "exhaustive and dishonest." Comparing it to the price-to-earnings ratio (PE) of traditional finance, Sigel underscores the importance of "moneyness" for layer-1 blockchains like Ethereum and Solana. He believes that users should evaluate blockchains based on their use as a medium of exchange, store of value, and unit of account in their ecosystem, their utility, and trustworthiness.
Sigel adds that Ethereum's core utility stems from its role in supporting validators by paying gas fees, which in turn fuels the wider adoption of DeFi and other services. The VanEck CEO also argues that the value of a token comes from the demand for the goods and services it is used to transact, and that Ethereum's economic activity contributes to its long-term value.
Sigel acknowledges some challenges facing the blockchain. He says the surge in Ethereum layer-2 solutions is driving down gas fees, which might reduce the blockchain's revenue. However, as the ETH ecosystem evolves, its focus on data availability could become more lucrative. Additionally, Ethereum co-founder Vitalik Buterin recently said he dislikes holding L2 tokens.
Sigel adds that Solana's lower prices have attracted many DeFi participants to the platform. But he adds that Solana's fees should increase over time to justify its valuation.
ETH price faces bearish sentiment
Weak demand and continued outflows from the spot Ethereum ETF have deprived ETH price of any upward catalysts. Other macroeconomic factors and a $42 million ETH hack have also contributed to the slump in ETH price. As of press time, Ethereum price is down 2.6% to $2,284, with a market cap of $274 billion. The broader crypto market crashed on Friday after Nvidia's stock plummeted. Demand for the Ethereum spot ETF market has also been dwindling, with over $500 million in total outflows since launch. On Friday, VanEck even decided to shut down its Ethereum futures ETF due to waning market demand.
Interestingly, analysts remain bullish on ETH, believing it to be the calm before the storm.
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