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Bad Decisions By Ethereum Foundation Hurt ETH Price, Hedge Fund CIO Says
- The Ethereum underperformance is due to strategic missteps by Ethereum Foundation and capital flow shifts, according to Zaheer Ebtikar, the Chief Investment Officer of Split Capital hedge fund.
- The author highlights capital flow issues based on three core sources: private and liquid funds, institutional investors using ETFs and futures, and retail investors via platforms like Coinbase and Binance.
- The value of private capital in 2021 was driven by crypto euphoria and saw the largest capital base of crypto funds, with more than $20bn in net inflows.
- Due to a decline in private capital and the lack of return of retail capital, institutional products become the only viable avenue for a bid for ETH.
- This resulted in pre-ETF ETH sellers opting out of ETH and swapping to SOL and post-ETF ETH sellers realizing ETH price required more than ETF flows.
- Despite Bitcoin’s surge, the rest of the market didn’t keep up as crypto-native investors, retailers, and private capital had reduced their Bitcoin holdings.
- Professional crypto investors and traders moved aggressively down the risk curve, and funds followed suit to generate returns.
- Ethereum’s predicament is that it is not in vogue with institutional investors, has lost favor in crypto private capital circles, and retail is not bidding for this size asset.
- The author suggests Ethereum should be marketed by traditional asset managers to attract institutional capital, and changes to the Ethereum Foundation’s direction and core focus can reinvigorate investor interest.
- 2025 will be an interesting year for crypto and especially for Ethereum, as much of the damage from 2024 can be unwound or further deepened.
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