Ethereum has put on a disappointing performance for its investors over the last few weeks, leading to concerns on whether the second-largest cryptocurrency by market cap has lost its shine. The cryptocurrency continues to skirt around the $3,100 level, not making any significant breaks upward. This points to weak fundamentals that could trigger a price decline.

Ethereum Fails To Make Meaningful Moves

Markus Thielen, Head of Research at 10x Research, has pointed out some worrying developments with the Ethereum price. In a new report shared with NewsBTC, he explains that despite Ethereum remaining highly correlated to Bitcoin with an R-Square of 95%, it continues to perform poorly while the latter has made new all-time highs.

Thielen points back to ETH’s performance in the last bull market, which was closely tied to new sectors popping out of the network, such as decentralized finance (DeFi) and non-fungible tokens (NFTs). This caused demand to skyrocket, and in turn, the price followed as users gobbled up ETH for the high gas fee required to transact on the blockchain.

However, Ethereum has failed to maintain this momentum, which can be attributed to its inability to bring the upgrades that users needed in time. Thielen explains that the Dencun upgrade which helped solved the high gas fee issues had come three years too late because by 2024 when the upgrade arrived, users had moved on to Layer 2 networks. Also, during this time, other Layer 1 networks have seen a rise in users and Solana is one example of this.

Ethereum fees

The researcher further explained that the weak fundamentals of ETH are now not only affecting its price but has had a spillover effect to Bitcoin. “Ethereum’s weak fundamentals are becoming a roadblock for Bitcoin as they prevent broad fiat inflow into the crypto ecosystem,” Thielen stated.

Better To Short ETH

Thielen’s analysis of Ethereum also spreads to the drop in stablecoin usage on the network. Back in 2021, Ethereum had dominated stablecoin transactions such as USDT and USDC. However, it seems like, with other things, the high fees have driven users towards other networks. Blockchains such as Tron (TRX) are now dominating stablecoin transactions, leaving ETH in the dust.

Additionally, there is also the fact that ETH’s issuance is turning inflationary once again. After the London Hard Fork, also known as EIP-1559, was completed in 2021, the network saw its issuance turn deflationary for the first time as ETH burned quickly surpassed ETH being brought into circulation.

However, this has now changed in the past months as there have been more ETH issued than those burned, Thielen notes. To put this in perspective, a total of 74,000 ETH were issued compared to only 43,000 ETH burned. This inflation, coupled with the fact that staking rewards have now dropped to 3%, below the 5.1% offered by Treasury Yields, Ethereum has had a hard time maintaining bullish sentiment.

Given these developments, the researcher believes it is better to be bearish on Ethereum right now. “Right now, we would be more comfortable holding a short position in ETH than a long one in BTC as Ethereum’s fundamentals are fragile, which is not yet reflected in ETH prices,” Thielen concludes.

Ethereum price chart from