Several Ethereum Competitors May Struggle to Rebound in the Next Bull Market Cycle, Notes Bloomberg Crypto Analyst

Bloomberg Crypto Analyst Jamie Coutts Suggests Ethereum (ETH) Rivals on Thin Ice

Coutts says on the social media platform X that the rise of Ethereum layer-2s (L2s) is helping to take revenue away from ETH competitors.

“The rise in L2s has meant that the Ethereum network has started to regain market share from the Alt-L1 (alternative layer-1) peers. In the past year, active address L2 growth outpaced Alt-L1s by 2x (albeit from a lower base)”

Source: Jamie Coutts/X

Coutts Highlights Challenges Faced by Ethereum (ETH) Competitors

According to Bloomberg crypto analyst Jamie Coutts, alternative smart contract platforms are confronting several challenges that jeopardize their viability. These challenges include inflationary tokenomics, congestion issues, and the rapidly expanding network effects of Ethereum.

Although the total fees generated by these blockchains are showing a sustained upward trend, Coutts suggests that many of these platforms could gradually fade into obscurity over the next few years.

Coutts commented, 'Despite the ongoing bear market, there is a long-term structural uptrend in Blockspace Demand. However, the crypto industry is grappling with significant self-inflicted problems. It is possible that only a small subset of platforms will remain relevant in the coming years.

Source: Jamie Coutts/X

Coutts Highlights Concerns Over Alt-Layer-1s' Fee Generation and Network Security

Coutts also raises concerns that numerous alternative layer-one blockchains may not be generating sufficient fees to guarantee the long-term security of their networks due to limited activity.

The analyst stated, 'While a collapsing treasury market could potentially challenge our thesis that the 2022 capitulation marked the cycle low for ETH, we maintain a positive outlook for the asset. However, we maintain a negative outlook for many Alt-Layer-1s (though not all) due to insufficient demand and subpar tokenomics.

Oct 09, 2023

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