Ethercoin in the Bull Market: Undervalued Blue Chip, or Gradually Slowing Giant?

Author: Frank, PANews

As the bull market enters the peak season of competitive coins, ETH seems to have little time left. Since the end of 2023, the performance of ETH has been closely watched during this round of rising cycle. However, it seems that the performance of ETH in the past year has been somewhat less than expected. The most intuitive observation is that, in terms of the increase, the maximum increase since October 2023 is 170%, and it has been repeatedly rubbing against the $4,000 mark without achieving a significant breakthrough. On the other hand, during the same period, BTC's maximum increase exceeded 300%, and SOL's increase exceeded 1,300%. Many people believe that ETH represents the opportunity of the peak season of competitive coins, but as several old competitive coins have risen sharply in the short term, the momentum of ETH is clearly insufficient.

Is Ethereum, the number one public chain, undervalued or performing normally based on objective data? Can an old general like Lián Pō still make a comeback?

The on-chain data has been standing still for a year

From the data on the chain, PANews can clearly observe that Ethereum has not experienced any significant growth in the past year, although it can't be said to be declining either.

The average number of daily transactions is a very important indicator of activity. When you open the chart of the average number of Ethereum transactions in the past year, you can see a fluctuating line that is stable overall, like an electrocardiogram. On December 8, 2023, the total number of transactions on the Ethereum mainnet was 1.18 million, and after a year, on December 8, 2024, this data was 1.22 million, almost unchanged. During this year, only in January 2024 did it briefly grow to 1.96 million. The rest of the time, it basically remained between 1 million and 1.3 million.

The trend of Gas fees can more clearly reflect the activity level on the chain. From the end of 2023 to the beginning of 2024, the Gas fee level of Ethereum still remains relatively high, averaging above 40 Gwei, and can reach around 100 Gwei at its peak. With the rise of new public chains like Solana, it is evident from the chart that the Ethereum Gas fee has decreased, especially from July to September, reaching a minimum of only 0.3 Gwei. Although there has been a recent rebound, the overall fee remains below 20 Gwei. Initially, Layer2 solutions surged because the Gas fee on the Ethereum mainnet was too expensive. Now, Ethereum's Gas fee has finally come down, but it seems that users don't know where to go, or rather, Ethereum has truly come down as users leave.

In terms of active addresses, the pattern of daily signed transaction volume is basically similar. According to the data displayed on the Ethereum browser, the number of active Ethereum addresses and ERC20 addresses per day has not increased much, and the data level is basically the same as before the bull market started.

User flow to L2, funds stay in L1

Where do Ethereum users specifically flow to? From the weekly on-chain activity data, about a year ago, the number of active addresses on Ethereum accounted for approximately 50% of all Layer2, and as time has passed, the current data shows that the active addresses on Layer2 are generally on the rise, while the proportion of active addresses on the Ethereum mainnet accounts for about 24% of the overall Layer2.

Looking at the performance of each chain individually, in December 2023, the Ethereum mainnet is the most active chain, accounting for approximately 32.48%. By December 2024, the most active chain has become Base, rising to 50%, with the Ethereum mainnet in second place at 19%, and Arbitrum in third place at 9.2%.

However, in terms of TVL, the Ethereum mainnet still seems to be the first choice for big players. In terms of the total amount of stablecoins locked on-chain, the Ethereum mainnet accounted for about 95% in December last year, and currently accounts for about 91%, with a slight decrease. Moreover, TVL data has also been the only significant increase for the Ethereum mainnet in the past year. In December 2023, the TVL of the Ethereum mainnet was about $28.8 billion, and by December 2024, the data had increased to around $77.5 billion. The growth rate is about 2.69 times, which exceeds the growth rate of Ether's price and is also related to the rise in asset prices during the bull market. Among Layer2 solutions, Arbitrum and Base rank second and third in terms of stablecoin TVL.

In terms of revenue, the Ethereum mainnet is also the most profitable chain in the Ethereum ecosystem. Over the past year, Ethereum's revenue has consistently accounted for over 80%, reaching 92% as of December 8th. The Base chain has become the second highest revenue-generating Ethereum ecosystem chain this year.

And Ethereum's market value has always remained at around 98%, despite a decrease in on-chain activity, the proportion of market value seems to be highly consistent with the overall TVL proportion. In addition, in terms of the proportion of the entire crypto market, Ethereum's market value has indeed been continuously declining within a year, and the current proportion is only about 13.4%.

However, considering the growth of TVL, most large funds still choose to keep their funds on the Ethereum mainnet. Comparing the ratio of total TVL to active users, Ethereum's data is 17.87 thousand USD, Base is about 3,315 USD, and Solana is about 1,972 USD. From this perspective, Ethereum still maintains the highest value per user in the whole network.

The departure of Uniswap may be a greater concern

From various data, Uniswap is still the undisputed largest application on Ethereum. In terms of DEX activity, Uniswap V2 and V3 together account for over 97% of the transaction volume on the Ethereum mainnet. Uniswap also consistently ranks first in the Ethereum burn leaderboard. As of December 9th, Uniswap has burned a total of 6372 Ethereum in the past 30 days, while Ethereum transfers have only burned 4594.

Once Uniswap moves most of its trading activity to its own Unichain, the activity and burn rate on Ethereum mainnet may decrease by an order of magnitude. According to Forbes, as Uniswap transitions to its own chain, validators on the Ethereum network could lose about $400-500 million in annual revenue. But more importantly than this economic loss, it threatens Ethereum's basic narrative as a deflationary currency. Uniswap's general router is the largest gas consumer, accounting for 14.5% of Ethereum's gas fees, which is equivalent to destroying $1.6 billion worth of Ether.

Based on the above indicators, we can summarize the following characteristics. The on-chain network activity of the Ethereum mainnet has not grown in the past year, and its proportion in the entire Ethereum ecosystem has gradually decreased. This at least indicates that the newly added users have basically chosen other Layer2 or other public chains (after all, emerging public chains such as Solana, Sui, Aptos, etc., have maintained rapid growth in these data).

So, going back to the original topic, has the fundamental of Ethereum changed significantly? Or is the price of ETH undervalued? Based on the above data, the Ethereum mainnet seems to be transforming into a fund pool for whales and major players. Even though gas fees have dropped significantly, it still cannot compete with Layer2 or other public chains in terms of transaction fees and speed. Therefore, the Ethereum mainnet is no longer a club for retail investors, and it does not have the advantage of a large community for popular races like MEME. It is more suitable for players who do not require high frequency and have higher asset security requirements. From this perspective, we can only say that the ecological role of the Ethereum mainnet is changing, and liquidity and security have become its final moat.

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Statement: The article represents only the author's personal opinions, not the perspective and position of the blockchain, and all content and views are for reference only and do not constitute investment advice. Investors should make their own decisions and trades, and the author and the blockchain will not be responsible for any direct or indirect losses incurred by investors' transactions.

Ether in a bull market: undervalued blue-chip or a giant gradually losing momentum? This article was first published in 'Blocklike'.