3 Reasons Why Ethereum Price is Underperforming Altcoins

Despite being the second-largest cryptocurrency by market capitalization, Ethereum (ETH) has been underperforming compared to other altcoins. This article explores three key reasons behind this trend.

1. Increased Competition from Other Altcoins

The first reason for Ethereum’s underperformance is the increased competition from other altcoins. With the rise of the DeFi (Decentralized Finance) sector, many new altcoins have emerged, offering similar or even superior functionalities compared to Ethereum.

• For instance, Binance Coin (BNB) has seen a significant surge in its price due to the success of Binance Smart Chain, a blockchain platform that offers lower transaction fees and faster transaction times than Ethereum.
• Similarly, Polkadot (DOT) and Cardano (ADA) have also gained popularity due to their unique features and potential to disrupt the Ethereum-dominated DeFi sector.

According to CoinMarketCap, BNB, DOT, and ADA have all outperformed ETH in terms of price growth in the past year.

2. High Transaction Fees

The second reason for Ethereum’s underperformance is its high transaction fees. As the Ethereum network becomes more congested, the cost of executing transactions and smart contracts on the platform has skyrocketed.

• According to data from YCharts, the average transaction fee on Ethereum reached an all-time high of $39.49 on February 23, 2021.
• This has led many users and developers to switch to other blockchain platforms with lower transaction fees, such as Binance Smart Chain and Polkadot.

As a result, the demand for ETH has decreased, leading to its underperformance compared to other altcoins.

3. Delay in Ethereum 2.0 Launch

The third reason for Ethereum’s underperformance is the delay in the launch of Ethereum 2.0, a major upgrade that aims to improve the scalability, security, and sustainability of the platform.

• The launch of Ethereum 2.0 has been delayed multiple times, causing uncertainty and frustration among investors and developers.
• Meanwhile, other blockchain platforms have already implemented similar upgrades, gaining a competitive edge over Ethereum.

For example, Cardano recently launched its “Mary” upgrade, which allows users to create their own tokens, similar to Ethereum’s ERC-20 tokens. This has led to a surge in ADA’s price, outperforming ETH.

Conclusion

In conclusion, the underperformance of Ethereum compared to other altcoins can be attributed to increased competition, high transaction fees, and the delay in the launch of Ethereum 2.0. While Ethereum still holds a significant position in the cryptocurrency market, these challenges highlight the need for continuous innovation and improvement to maintain its competitiveness.