The Dilemma and Future of ETH: Balancing Technological Innovation and Value Capture

Ethereum is facing unprecedented challenges recently. The ETH/BTC ratio has fallen to its lowest point in five years, sparking widespread discussion in the market about the future development of this once undisputed leader in smart contract platforms. This article will delve into the viewpoints of both bullish and bearish camps, as well as the strategies that investors may adopt in the current situation.

I. Arguments of Optimists: Technological Progress and Ecological Advantages

Despite the poor price performance, optimists believe that the long-term value of Ethereum is steadily accumulating. Their views are mainly based on the following aspects:

1. Ethereum remains the core of blockchain infrastructure: emerging trends such as stablecoins, tokenization, and AI Agents all use Ethereum as the primary platform. As long as user experience is improved through Layer 2 solutions while maintaining its position in the minds of institutional investors, the outlook remains optimistic.

2. Continuous technological upgrades are releasing dividends: The upcoming Prague/Electra upgrade will significantly enhance Rollup performance, making the Ethereum network faster, cheaper, and more open. These optimizations may attract users back and strengthen demand for ETH.

3. Ecosystem structural adjustment: Ethereum is shifting from a technology-driven to a capital and ecosystem-led development path. Although this strategic adjustment may not be immediately reflected in prices in the short term, the direction is clear in the long run.

4. Market Undervaluation Theory: Some well-known analysts and traders believe that ETH is currently severely undervalued by the market and predict a significant increase in the future.

5. Macroeconomic liquidity factors: The current price stagnation is primarily due to the overall market liquidity not being fully released, rather than an issue with Ethereum itself.

6. Bull Market Rotation Opportunities: With expectations of interest rate cuts and progress on ETFs, ETH is expected to become the market focus again.

7. TVL Advantage: Ethereum still dominates the total locked value in DeFi, demonstrating its continued appeal as a store of value.

8. Inflation Rate Advantage: The annual issuance rate of ETH is lower than that of BTC, demonstrating a more sustainable monetary model.

9. Leading Developer Ecosystem: Ethereum accounts for 65% of global on-chain developer innovation activities, with over 6200 active developers each month.

10. Governance structure optimization: The restructuring of the foundation is expected to improve decision-making efficiency and transparency, enhancing the certainty of long-term development.

2. Concerns of Pessimists: Failure of Value Capture and Intensifying Competition

On the other hand, pessimists believe that Ethereum faces severe challenges:

1. Institutional views are bearish: Some analysts believe that ETH may not have reached its bottom yet, and large institutions may still be suppressing prices to accumulate.

2. Insufficient ecological growth momentum: Traditional sectors (DeFi, L2, NFT) are stagnating, and emerging hotspots (AI, Meme) have a low correlation with ETH.

3. RWA narrative questioning: The capability of Ethereum as the underlying layer for tokenizing real-world assets is being questioned and may not be the optimal solution.

4. On-chain growth slows down: mainnet user growth stagnates, and new users are more inclined to choose L2 or other public chains.

5. Supply Inflation: The decline in network transaction fees has led to ETH entering an inflationary state.

6. Poor market performance: The ETH/BTC ratio has hit a five-year low, lagging behind other mainstream coins.

7. Intensified competition: The rise of new public chains like Solana attracts a large number of users and developers.

8. Technical Roadmap Controversy: The current technical roadmap may benefit user experience, but it is detrimental to token value.

9. Core application outflow risk: Important applications considering independent development may lead to ecological siphoning.

10. Governance Trust Crisis: Rumors of high-level cashing out by the foundation have raised doubts in the community.

11. Community Divergence: There is a fundamental disagreement on the degree of reliance on the mainnet and L2, resulting in a lack of overall direction.

3. Investment Strategy Recommendations

Based on the above analysis, different types of investors may consider the following strategies:

1. Long-term value investors: If you believe that ETH represents the future infrastructure of Web3, you may consider holding or gradually increasing your position, waiting for the next cycle.

2. Medium to short-term investors: Consider moderately reducing ETH positions, keeping a flexible base position for adjustments, or engaging in swing trading to enhance capital efficiency.

3. Investors focusing on short-term performance: They can gradually reduce their positions during the rebound while closely monitoring key indicators of the Ethereum ecosystem, waiting for new investment opportunities.

Overall, Ethereum is at a crossroads of technological advancement and value capture. Investors need to carefully assess the current situation based on their own risk tolerance and investment horizon, and make corresponding investment decisions.