Crypto Update | Can ETH Regain Momentum Amid Fierce Competition?

Summary

Markets Daily Crypto Roundup: Can ETH Regain Momentum Amid Fierce Competition?

Host: Jen Senassi
Guest: Matthew Siegel, Head of Digital Asset Research at VanEck
Release Date: February 18, 2025

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1. Introduction and Market Landscape

In the February 18, 2025 episode of Markets Daily Crypto Roundup, host Jen Senassi engages in a comprehensive discussion with Matthew Siegel from VanEck about the current state of the cryptocurrency market, focusing primarily on Ethereum's (ETH) performance amidst growing competition.

2. Bitcoin Dominance and Market Resilience

Matthew Siegel begins by highlighting Bitcoin's enduring dominance in the crypto market. He notes, “It's common during the bull market phase to have many drawdowns for Bitcoin in the 10% range” (01:24). Despite minor setbacks, Bitcoin has maintained a strong foothold since its all-time high prior to the recent inauguration.

Jen adds context, mentioning that Bitcoin has been "hanging out" near this drawdown level, reinforcing its position as a market leader.

3. Ethereum and Altcoin Underperformance

A significant portion of the discussion revolves around Ethereum and the broader altcoin market. Siegel points out, “The equal-weighted basket of the top hundred coins has been really disappointing” (01:45), marking this period as the biggest post-election drawdown ever observed.

Key factors contributing to this downturn include:

• Capital Outflows: Investors are moving funds from Ethereum to alternative layer ones.
• Tokenomics Issues: Frustration with the tokenomics and high inflation rates prevalent among 2024 altcoins.
• Performance Decline: Altcoins, particularly Ethereum, have underperformed due to these dynamics.

4. Competition from Alternative Layer Ones

Siegel elaborates on why Ethereum is losing ground, citing the rise of alternative layer ones like Solana and Sui. He states, “They are attracting users with superior speed, cheaper costs, and wider accessibility to retail” (04:32). These competitors offer enhanced performance metrics that are appealing to both users and developers.

5. Upcoming Developments and Ethereum's Strategic Response

Despite current challenges, Ethereum is not standing still. Siegel discusses the upcoming Pectra fork slated for March, which aims to improve user experience and regain some market share. He expresses cautious optimism: “Given that expectations are so low, we're optimistic that some of the better functionality... will drive interest in ETH” (05:02).

Key enhancements include:

• Account Abstraction: Simplifying automated payments using Ethereum wallets.
• Ethereum ETFs: Anticipated approval by the SEC, making Ethereum more liquid and accessible to traditional finance players.

6. Institutional Adoption and Regulatory Environment

Ethereum continues to enjoy wide acceptance within the traditional finance ecosystem. Siegel notes, “Nobody is abandoning Ethereum” (06:04), emphasizing its integral role for fund managers tokenizing various traditional financial instruments.

The regulatory landscape is also turning favorable:

• SEC Approval: Expected for Ethereum ETFs by year-end, facilitating easier creation and redemption processes.
• Staking Integrations: Potential inclusion in ETFs, enhancing Ethereum's appeal.

Siegel reassures, “We don't feel like banks and brokers have lost confidence or conviction in Ethereum” (06:49), highlighting sustained institutional trust.

7. Prospects for Ethereum Amidst Increasing Competition

Jen queries whether Ethereum can regain its previous momentum in the face of burgeoning competition. Siegel responds optimistically, stating, “I would be very surprised if ETH doesn't at least keep pace once the bull market resumes every cycle” (08:10). He underscores Ethereum’s second-place standing and its potential to attract renewed investment when market conditions improve.

8. Bull Market Indicators and Future Outlook

Siegel draws parallels between current market indicators and those preceding the November 2023 rally:

• Low Bitcoin Volatility: Currently mirrors conditions that historically led to bull runs.
• Altcoin Performance: Altcoins are down approximately 35% from their peak, presenting a buying opportunity.

He suggests, “If bitcoin can just kind of hang out at the 100k level, then we could get maybe half of those IPOs this year” (13:15), indicating that sustained Bitcoin performance could catalyze broader market growth.

9. Crypto IPOs and Market Capitalization Growth

The conversation shifts to the emerging trend of crypto-related IPOs. Siegel mentions VanEck's initiative to file for an actively managed ETF targeting digital asset equities (11:30). Prominent crypto firms like Circle, Gemini, Kraken, Bullish, Ripple, Figure, and Chainalysis are rumored to pursue public listings, which Siegel believes will significantly increase market capitalization.

Key points include:

• Underwriting Partnerships: Major banks like Bank of America and Citigroup are actively positioning themselves to underwrite these IPOs.
• Regulatory Support: Easier pathways from pink sheets to major exchanges (NYSE/NASDAQ) are fostering growth.
• Global Attention: Siegel highlights the importance of international recognition, noting that events like these attract global investor interest.

10. Conclusion and Final Thoughts

Jen wraps up the episode by reflecting on the discussion, emphasizing the intertwined futures of Bitcoin, Ethereum, and the broader altcoin ecosystem. The potential for Ethereum to regain momentum hinges on its ability to innovate and maintain institutional support amidst increasing competition and evolving market dynamics.

Notable Quotes:

• Matthew Siegel (01:29): “It's common during the bull market phase to have many drawdowns for Bitcoin in the 10% range.”
• Matthew Siegel (04:32): “Layer ones like Solana and Sui are attracting users with superior speed, cheaper costs, and wider accessibility to retail.”
• Matthew Siegel (06:07): “Nobody is abandoning Ethereum.”
• Matthew Siegel (08:10): “I would be very surprised if ETH doesn't at least keep pace once the bull market resumes every cycle.”

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This episode provides a nuanced analysis of Ethereum's current challenges and the broader cryptocurrency landscape. It underscores the importance of innovation, strategic upgrades, and institutional trust in navigating the competitive and volatile crypto markets.

Transcript

[Matthew Siegel]

One key reason for ETH's underperformance in.

[Jen Senassi]

Recent quarters is just simply capital outflows from the Ethereum ecosystem to alternative layer.

[Matthew Siegel]

Ones like Solana and Sui, who are attracting users with superior speed, cheaper costs and wider accessibility to retail.

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[Jen Senassi]

Hello and welcome to Markets Daily, hosted by me, Jen Senassi. On this show we navigate the currents shaping the crypto markets, providing insights against the broader financial landscape. So whether you're actively trading or simply fascinated in the volatility that is the crypto markets, this show is your compass to understanding what's happened, where we are and where we're going. Joining me on today's show is head of Digital Asset Research at Vaneck, Matthew Siegel. Matthew, how are you?

[Matthew Siegel]

Hi Jen, thanks for having me.

[Jen Senassi]

Of course, thanks for being here. I like to start off by asking this question of all my guests, what have you been watching recently?

[Matthew Siegel]

I guess we've been watching the persistent.

[Jen Senassi]

Resilience of Bitcoin dominance.

[Matthew Siegel]

It's common during the bull market phase to have many drawdowns for bitcoin in the 10% range. And that's more or less where we've.

[Jen Senassi]

Been hanging out since BTC hit that all time high right before the inauguration.

[Matthew Siegel]

But really the altcoins Ethereum and especially if we look at our equal weighted basket of the top hundred coins has been really disappointing.

[Jen Senassi]

This is the biggest post election drawdown.

[Matthew Siegel]

That has ever occurred subsequent to an election. And it seems like there's a lot of frustration with the kind of tokenomics.

[Jen Senassi]

And inflation rates of many of kind of the 2024 vintage of altcoins.

[Matthew Siegel]

So I guess, you know, the biggest.

[Jen Senassi]

Question that we're getting and trying to.

[Matthew Siegel]

Ask ourselves as well is what will catalyze a resumption in kind of altcoin outperformance?

[Jen Senassi]

Well, I'm going to ask that question right back to you. What have you found as you explore this?

[Matthew Siegel]

A couple things. One is just that you know, you want to be buying low and selling high. So with our like equal weighted altcoin basket down 35% or so from the peak, it's probably a better time to.

[Jen Senassi]

Look for longs than to try to.

[Matthew Siegel]

Sell things at the bottom. We've also noticed that like last year's L2s, very crowded, a bunch of Ethereum.

[Jen Senassi]

L2s that came to market generally with low floats and fully discounted valuations. And Nearly all those L2s have underperformed Ethereum.

[Matthew Siegel]

And Ethereum performance itself is somewhat disappointing. So we've noticed that token issuers are taking that feedback into account.

[Jen Senassi]

And I know that the AI coins have drawn down a lot, but if.

[Matthew Siegel]

You look at kind of the supply.

[Jen Senassi]

Demand dynamics of some of those newer.

[Matthew Siegel]

Coin launches, they seem to be more.

[Jen Senassi]

Balanced in terms of what's the future supply.

[Matthew Siegel]

So we're hopeful and optimistic that kind of the 2025 vintage of coins will have less of that dynamic going forward.

[Jen Senassi]

That's really interesting. You mentioned Ether there. The Ethereum ecosystem previously, Ether and Bitcoin really kind of traded in lockstep. It really feels like that is not the narrative anymore. What are you looking at when it comes to the Ethereum Ecosyste system? And how do you see Ether performing over the next few months?

[Matthew Siegel]

Yeah, one key reason for ETH's underperformance.

[Jen Senassi]

In recent quarters is just simply capital outflows from the Ethereum ecosystem to alternative.

[Matthew Siegel]

Layer ones like Solana and Sui, who are attracting users with superior speed, cheaper costs and wider accessibility to retail. Now Ethereum core developers are trying to stay competitive.

[Jen Senassi]

There's a major upgrade slated for March.

[Matthew Siegel]

Called the Pectra fork, which should improve Ethereum's user experience and perhaps stem some of these market share losses.

[Jen Senassi]

Historically, Ethereum forks have been more of.

[Matthew Siegel]

A sell the news, but given that expectations are so low, we're optimistic that, you know, maybe some of the better functionality that's coming around, account abstraction, specifically.

[Jen Senassi]

Making it easier to automate payments using Ethereum wallets will drive some more interest in eth. I think the other thing that ETH.

[Matthew Siegel]

Has in its favor is wide acceptance from traditional finance ecosystem. So for fund managers who are tokenizing.

[Jen Senassi]

Various tradfi instruments, nobody is ignoring eth, right?

[Matthew Siegel]

They may be adding Solana onto the.

[Jen Senassi]

List of chains that they will support.

[Matthew Siegel]

But nobody is abandoning Ethereum. Meanwhile, the regulatory backdrop is improving. We are expecting the SEC to approve.

[Jen Senassi]

The in kind creation and redemption of.

[Matthew Siegel]

Ethereum ETFs, which would make them more.

[Jen Senassi]

Liquid, less capital intensive for the intermediaries who facilitate ETF creations and redemptions. Also, staking could be added to the.

[Matthew Siegel]

Ethereum ETFs, likely before the end of the year. And as we talk to our more typical clients, the banks and brokers, the.

[Jen Senassi]

Wirehouses on Wall street who distribute fund.

[Matthew Siegel]

Manager products, we don't feel like they've lost confidence or conviction in Ethereum.

[Jen Senassi]

On the contrary, they're kind of just.

[Matthew Siegel]

Heading up the learning curve.

[Jen Senassi]

So if there is a institutional adoption.

[Matthew Siegel]

Of open source digital assets, I think Ethereum is going to be part of that.

[Jen Senassi]

That's interesting. And I say that because under the current administration, I can only imagine that we're going to see more layer ones pop up. We're going to see more layer twos pop up on top of these layer ones. And so given that, do you think that Ether can regain the momentum that it once had? Or will it be something that is used, possibly adopted by institutions, but it is going to have a lot more competition that might not let it get back to that place where it once was?

[Matthew Siegel]

I think a lot of it is.

[Jen Senassi]

Just going to be driven by the.

[Matthew Siegel]

Overall tape if bitcoin is working.

[Jen Senassi]

And I mean, you need a certain.

[Matthew Siegel]

Amount of bitcoin profits before market participants.

[Jen Senassi]

Will recycle that into kind of riskier coins like Eth, Solana and the long tail of alts. I would be very surprised if ETH.

[Matthew Siegel]

Doesn'T at least keep pace once the bull market resumes every cycle. There's a lot of competitors like the.

[Jen Senassi]

Top 10 coins, as you know, tends.

[Matthew Siegel]

To, aside from bitcoin, turn over every cycle. Ethereum still hanging out there in in number two position. So my bias is still that flows.

[Jen Senassi]

Will return to it once the bull market resumes.

[Matthew Siegel]

If that's not the case, we'll have.

[Jen Senassi]

To revisit the thesis.

Matthew, when is the bull market going to resume? And not everyone loves to answer this question, but I got to ask it. Where do you see the price of Bitcoin and ETH heading once the bull market does resume?

Yeah, Bitcoin's pretty much been trading in.

[Matthew Siegel]

Lockstep with the odds of a strategic Bitco being enacted.

[Jen Senassi]

And there's still a path to that.

[Matthew Siegel]

Happening at the federal level.

[Jen Senassi]

There's two paths, actually.

[Matthew Siegel]

There's the executive branch simply decreeing that.

[Jen Senassi]

A strategic stockpile exists and directing the.

[Matthew Siegel]

Treasury to buy some through the exchange.

[Jen Senassi]

Stabilization Fund or just holding on to the coins that have already been seized. There's the legislative approach that Cynthia Lemmis has mooted.

[Matthew Siegel]

And you can expect more news on that next month.

[Jen Senassi]

There'll be events in Washington, D.C. to.

[Matthew Siegel]

Educate lawmakers and try to build momentum for that. But we shouldn't forget what's happening at the state level.

[Jen Senassi]

We're tracking 20 different pieces of legislation.

[Matthew Siegel]

That cumulative could account for more than.

[Jen Senassi]

$20 billion of flows into bitcoin.

[Matthew Siegel]

Now, we don't think all of them will happen, but we do think at least One one will occur this year and I just got back from Dubai and judging from my conversations over there.

[Jen Senassi]

The rest of the world is going to really take notice once there is.

[Matthew Siegel]

Government buying of bitcoin. So that would be one thing that would definitely, I think catalyze the next leg of the bull market. But I think it's just important to see like where we are. Altcoins down 35% Bitcoin volatility, the last time it was this low, there was a rally, it was November 2023.

[Jen Senassi]

The last time BTC volatility was this low on a short term basis, that.

[Matthew Siegel]

Was the beginning of a bull market.

[Jen Senassi]

Funding rates in many cases are back down to essentially 0% or negative for many alts.

[Matthew Siegel]

So the setup is positive.

[Jen Senassi]

If we just get a whiff of.

[Matthew Siegel]

Good news, the SBR would be one thing, that would be good news. But then I think you also just have.

[Jen Senassi]

Judging by our phone calls from financial advisors who are still stuck at.

[Matthew Siegel]

Zero on their bitcoin allocation, those types of flows I think as we get into deeper in Q1 and Q2 will become more steady.

[Jen Senassi]

I had an analyst on the show recently who talked a little bit about the crypto IPOs that we are expecting and the incentive that companies looking to IPO might have to prop up the price of bitcoin. Curious on your thoughts there. How do you think the potential for more crypto IPOs might affect the markets?

[Matthew Siegel]

Yeah, you're going to see us be more active in the equity part of this ecosystem. Over the course of 2025, we filed for an actively managed ETF that would buy equities exposed to digital assets.

[Jen Senassi]

You know, the list of potential IPOs is pretty long.

[Matthew Siegel]

You've got Circle Gemini, Kraken, Bullish, Ripple Figure, Chainalysis.

[Jen Senassi]

These are all names that have been rumored to try to go public this year.

[Matthew Siegel]

And it takes two to tango here. It's not just the issuer. You need to have banks that are.

[Jen Senassi]

Willing to underwrite these IPOs.

[Matthew Siegel]

And if seen recent news that both bank of America and Citigroup bulge bracket investment banks have been hiring investment bankers and pitching to win these IPOs. I think that's an important element to bringing more market cap to the space. The other thing that's happening is the.

[Jen Senassi]

SEC is providing a slightly easier path.

[Matthew Siegel]

Towards uplifting from the pink sheets to.

[Jen Senassi]

The big board or moving from the Canadian exchange onto the nyse.

[Matthew Siegel]

We've seen a number of stocks kind.

[Jen Senassi]

Of small caps that have performed very, very well as they achieved that uplifting. There's some bigger companies yet to come. Galaxy is one that's out there that.

[Matthew Siegel]

A lot of people are watching.

[Jen Senassi]

If they're able to get a NASDAQ.

[Matthew Siegel]

Listing, that would probably drive a lot.

[Jen Senassi]

Of institutional interest to the space.

[Matthew Siegel]

So, you know, fingers crossed. I think if bitcoin can just kind of hang out at 100k level then.

[Jen Senassi]

We could get maybe half of those IPOs this year.

Matthew, thanks so much for joining Markets Daily today.

[Matthew Siegel]

Thanks, Jim.

[Jen Senassi]

And just a disclosure, you mentioned that Bullish might be looking to go public. Bullish is the parent company of CoinDesk. All right. Thank you to our audience who watched today's episode of Markets Daily. If you don't already do it, subscribe to our YouTube channel. Give this video a thumbs up if you prefer to listen to this show. We are on the Coindesk podcast network that is available on all podcast platforms. Thanks for watching. Thanks for listening and we'll see you tomorrow.