These Ethereum Competitors Are Down Over 90% – Are They Worth the Risk?

Ethereum (ETH -3.83%) may be down 69% for the year, but the competition is being crushed even harder. Layer 1 blockchain networks such as Avalanche, phantom, and Solana (SUN -10.11%) are all down 90% or more so far this year. In fact, they are among the worst performing cryptos in the entire market.

This dramatic autumn has been eye-opening. During the recent crypto bull market rally, each of these cryptos was heralded as a potential “Ethereum killer.” But that was before The Merge, and the market seems to be making a strong point: Nobody needs “another Ethereum” these days. So are any of these Ethereum rivals still worth buying?

Market consolidation

The big picture here is that there will likely be massive market consolidation in the wake of The Merge. Before The Merge, there was a need for faster, cheaper blockchain networks that could do everything Ethereum could do. After The Merge, there is no longer this need. It’s nearly impossible to out-Ethereum Ethereum these days, especially with the popularity of Layer 2 scaling solutions that help address any remaining weaknesses. The end result? The market is likely to have extremely high expectations for any Layer 1 blockchain network that claims it can be “the next Ethereum.”

Image source: Getty Images.

This is not to say that the Layer 1 blockchain space is winner-take-all. The big question is what the market structure of the Layer 1 blockchain space is going to look like after the crypto winter is over. If you think of blockchain networks like cell phone networks, it could be a situation where a few big players dominate. Just as most people use one of a handful of nationwide mobile network providers, and no one provider has a real monopoly on the market, the same could be the situation in the Layer 1 blockchain space.

That kind of market structure could create an opening for Avalanche, Fantom, Solana, or any other Tier 1. They just need to do something different than Ethereum, which already offers smart contracts, decentralized finance (DeFi), non-fungible tokens (NFT -is). ), and blockchain games. Being faster or cheaper is no longer enough. So what can they do that Ethereum can’t?

Can Solana Really Challenge Ethereum?

From this perspective, I think Solana is the only one of these Ethereum challengers worth investing in now. For example, Solana is the only Tier 1 with a mobile crypto strategy. In early 2023, Solana plans to launch a “cryptophone” that will make it much easier to interact with crypto via mobile. This could completely change the way people think about mobile apps, crypto wallets and Web3.

Second, Solana is arguably the only one of the major Layer 1 blockchain networks to have invested in a consumer-facing brand. In late summer, Solana opened the first ever crypto store in Manhattan. It followed this up with another crypto store in Miami in October. However, Solana does not refer to these as shops. Instead, it likes to refer to them as “embassies,” since they’re places for regular, everyday crypto enthusiasts to hang out for hours.

That’s not to say that investing in Solana doesn’t come with a lot of risk and volatility. Thanks to the now widely publicized relationship with Sam Bankman-Fried, FTX and Alameda Research, Solana is coming under scrutiny. In retrospect, it is now easy to see why Solana has been able to expand so aggressively. That said, Solana points out that it still has 30 months of runway until all the money runs out, so there’s no need to panic just yet.

Time to buy Ethereum

Right now, if you are thinking of investing in the Layer 1 blockchain space, the safest option is to just invest in Ethereum. With Ethereum, you invest in the recognized market leader. Ethereum has the largest group of blockchain developers in the world, and it still has a greater than 50% market share of all blockchain activity going on these days. In contrast, rivals like Avalanche and Fantom only control a very small bit.

At one time there was a huge demand for “Ethereum killers”, but it now seems that Ethereum won. At a time of maximum market uncertainty and risk, it’s time to invest in winners, not losers.