BlockByte Weekly: Ethereum Loses Market Share, Gold & Global M2 Surge

Hi Reader,

Thanks for reading The BlockByte Weekly, where we summarise the key updates in crypto over the last week and provide our perspective on what you need to know as an investor.
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Executive Summary​
​This week Ether hit a 5 year low priced in Bitcoin. The second biggest blockchain continues to lose market share as faster and cheaper blockchains like Tron and Solana continue to gain traction. Meanwhile, gold continues to hit new all-time highs in the face of economic uncertainty posed by Trump's trade and tariff policies, up over 17% YTD. Finally, one very bullish indicator shows that bitcoin price has correlated very strongly with global money supply over time, based on the 10-week lag, we could see some strong price momentum in the coming weeks. Bearing in mind, no indicator is perfect.
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Market Update

Ether Hits 5 Year Low Priced in Bitcoin

Ethereum priced in bitcoin has hit a new 5 year low, falling by more than 75% from its highs in late 2021. In the last year alone, while Bitcoin is up 30%, Ethereum is down 45%. Concerns around the second largest blockchain are growing and have been reflected in developer confidence with 17% less developers now working on the network when compared to last year according to this report from Electric Capital.

Faster and cheaper blockchains like Solana have been the go-to blockchain for the recent memecoin frenzy, including TrumpCoin. In addition, Solana has twice as many active addresses compared to Ethereum and its developer ecosystem grew 83% compared to last year.

Another driver of Ethereum's price struggles has been the reduced demand for the token on its own blockchain. In order to compete with faster cheaper networks, Ethereum has relied more heavily on what are called Layer 2 networks where most of the transaction activity takes place, before ultimately being settled on Ethereum. In doing so, all of the transaction fees (gas) that were once being accumulated by Ethereum and driving demand for its Ether token have fallen substantially.

The Ethereum leadership team finds itself at a cross roads. Ether is still the dominant blockchain for de-fi and stablecoin volumes, but its market share is shrinking. From having close to 100% of the stablecoin volume on its blockchain until 2019, Ether now settles about 56% of the stablecoin volume, with Tron, Solana and BASE growing significantly.

The question for Ethereum investors is where to next? Without any core competitive advantage from a technical point of view, other than perhaps it being the most decentralised and wide spread alt coin, we could see the trend down continue until the whole market rebounds. We would like to see a technical breakthrough that allows Ethereum to catch-up to its competition, but currently, we see the decline in market share as the most likely outcome.

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Trump's Tariffs Weigh Heavily On Markets

The Trump administration plans to slash the US's $2T annual deficit by cutting $1T in costs and generating an additional $1T in revenue according to Secretary of Commerce, Howard Lutnick. Since January, DOGE claims to have slashed $130B in government spending across asset sales, contract/lease cancellations and renegotiations, fraud and improper payment deletion, grant cancellations and workforce reductions. Gold has responded best to the market uncertainty, hitting a new all-time high on March 27 of $3,059 per ounce. So far this year, gold has risen by 17.5% with bitcoin down 10.7%. At the current moment in time, the market appears to be in a risk-off trade, which has seen both equity and crypto markets pull back significantly since Trump has taken office.

All Eyes On Global M2 (Money Supply) Growth

One of the more bullish charts circulating on X at the moment is from ex-Goldman Sachs banker, Raoul Pal. The chart shows the correlation between M2 global money supply and bitcoin's price with a 10-week lag. The logic is that when more money is created by central banks (quantitative easing), it takes time to work its way through lending markets and into the hands of consumers and investors. In spite of all the tariff fears, this chart is certainly providing a degree of hope for investors as bitcoin's price has been heavily correlated with this indicator. Based on the chart below, we could see some positive price action in the coming weeks, though this isn't a certainty and other factors such as consumer confidence, corporate earnings and ETF flows may drive the price in the opposite direction.

Until next week,
James

James Brannan
Managing Director
BlockByte
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(+61) 412 393 634
​james@blockbyte.com.au​
​https://blockbyte.com.au/​

BlockByte does not provide financial advice. We provide a personalised brokerage service with tailored support, research and secure custody for investing in digital assets. Reach out to our team to discuss how we can help.

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