Ethereum, the second-largest cryptocurrency by market cap, has fallen $1 trillion behind Bitcoin due to various factors such as declining whale transactions, the selling off of ETH by the Ethereum Foundation, and slow adoption of exchange-traded funds (ETFs). These market struggles can also be attributed to concerns about centralization following Ethereum’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
The decline in whale transactions for Ethereum has been significant, with a drop of nearly 70% since the 2021 bull cycle. This has resulted in reduced liquidity and less appeal to large investors. Vitalik Buterin, the co-founder of Ethereum, has highlighted the issue of centralization risks in a recent blog post, explaining that while the separation of powers in the PoS system helps keep validators decentralized, it can lead to the centralization of specialized tasks.
Furthermore, the Ethereum Foundation has sold approximately 336,000 ETH, equivalent to around $906.3 million, over the past four years. This has added to the bearish sentiment surrounding the asset. These factors, along with the slower adoption rates of ETFs compared to Bitcoin, have contributed to Ethereum’s decline in the market.
Ethereum’s market cap fell $1 trillion behind Bitcoin by October 2024, which is a significant gap compared to the $625 billion difference during the 2021 bull cycle. The transition to PoS has raised concerns about centralization, as only large stakers can meet the minimum stake requirement of 32 ETH. This has resulted in the dominance of major validators, with two block builders validating the majority of blocks in October 2024.
To address these centralization concerns, Buterin has introduced a new roadmap to mitigate the risks. Investors are eagerly awaiting further developments in 2025. Currently, Ethereum is trading at $2,635.43, with a slight decrease in the past day but a small increase in the past week, according to CoinMarketCap.
In conclusion, Ethereum’s market struggles can be attributed to declining whale transactions, ETH sales, and slow adoption of ETFs. Concerns about centralization following the transition to PoS have also impacted its market position. However, efforts are being made to address these concerns and investors are hopeful for future developments.