In an October 8 report, ETC Group advised investors to hold Ethereum ( ETH ), Solana ( SOL ), and Aptos ( APT ) due to their strategic importance in the layer-1 blockchain space.
As Ethereum faces increasing competition from newer blockchains, the report stressed the importance of assessing the recent situation and long-term performance of the market.
Ethereum is facing challenges
According to the report, Ethereum's poor performance in Q3 was due to three main factors, the main one being the Dencun update, which significantly reduced gas fees to increase the efficiency of the layer 2 network.
This led to a drop in transaction fees and network activity on the Ethereum mainnet, negatively affecting user sentiment towards the network.
Additionally, the market crash in early August due to the cancellation of Japanese Yen interest rate carry trading led to a reduction in leverage across the market, with ETH being one of the most affected coins.
The report noted that the poor performance of spot Ethereum ETFs also contributed to the quarter’s poor performance, with weak inflows from spot exchange-traded funds (ETFs). Since their launch, spot Ethereum ETFs have recorded negative net inflows of $546 million, according to data from Farside Investors.
Despite these setbacks, ETC Group’s analysis shows that Ethereum appears resilient so far this year, maintaining a performance index of 101 compared to Solana’s 128 and Aptos’ 78.
The report calculates network dominance using the Comprehensive Network Dominance Index (CNDI), which combines metrics such as Network Utilization Efficiency (NUE) and Economic Intensity Index (EDI).
Based on its findings, Ethereum remains the most dominant network, with 45% market share, followed by Solana at 35% and Aptos at 20%. The report attributes Ethereum’s long-term market leadership to its solid ecosystem and consistent user engagement, which has cemented Ethereum’s long-term position despite growing competition.
Solana, Aptos grow
Solana has demonstrated a sustainable ability to attract users and developers based on its associated net cash flow growth, reaching $1 billion in Q3, according to the report.
This makes it an attractive asset to hold for investors as its growth trajectory is likely to continue in a bull scenario. However, it also added that Solana’s dominance could be challenged in the coming months as Aptos gains momentum, which could reduce some of its growth forecasts.
Despite its relatively small market share, Aptos has shown promise as a competitor in the layer 1 space, with developer activity 23% higher than the average for other networks. The network has leveraged its success in the blockchain gaming space and demonstrated a strong ability to process large transaction volumes efficiently at low costs.
However, the report notes that Aptos faces barriers to developer adoption due to its relatively new Move programming language, which has yet to gain widespread support. In contrast, Solana's use of Rust provides mature tooling and infrastructure, giving it an advantage.
