ETC Group advises holding Ethereum, Solana, and Aptos through market changes.
In an October 8 report, ETC Group recommended investors hold Ethereum (ETH), Solana (SOL), and Aptos (APT) due to their strategic importance in the layer-1 blockchain space.
As Ethereum faces stiff competition from modern blockchains, the report highlights the importance of assessing the market’s recent developments and long-term performance.
Ethereum is facing challenges
According to the report, Ethereum’s poor performance in the third quarter was driven by three main factors, the main one being the Dencun update, which significantly lowered gas fees to increase the efficiency of the layer 2 network.
This led to a decline in transaction fees and network activity on the Ethereum mainnet, negatively impacting user sentiment towards the network.
Additionally, the market crash caused by the liquidation of the Japanese Yen carry trade in early August led to deleveraging across markets, with ETH being the most affected.
The report noted that the poor performance of spot Ethereum ETFs contributed to the weak performance of the quarter, namely the vulnerability of spot exchange-traded fund (ETF) flows. Since launch, the spot Ethereum ETF has recorded negative net flows of $546 million, based on Farside Investors data.
Despite this setback, ETC Group’s analysis shows that Ethereum has been resilient year-to-date, maintaining a performance index of 101 compared to Solana’s 128 and Aptos’ 78.
The report calculated network dominance using the Comprehensive Network Dominance Index (CNDI), which combines indicators such as Network Utilization Efficiency (NUE) and Economic Density Index (EDI).
According to the findings, Ethereum remains the most dominant network with 45% market share, followed by Solana (35%) and Aptos (20%). The report attributes Ethereum’s continued market leadership to its well-established ecosystem and consistent user engagement, which has strengthened its long-term position despite increasing competition.
Solana, Aptos growth
Solana has demonstrated a sustainable ability to attract users and developers, with bridge net flow growth reaching $1 billion in the third quarter, according to the report.
This makes it an attractive asset for investors to own, as its growth trajectory is likely to continue even in a bullish scenario. But Solana’s dominance could be challenged in the coming months as Aptos gains momentum, which could dampen some of its growth prospects, he added.
Despite its relatively small market share, Aptos has shown its potential as a contender 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 sector and demonstrated its powerful ability to efficiently handle high transaction volumes at low costs.
However, the report notes that Aptos faces obstacles to developer adoption due to the relatively new Move programming language, which has yet to gain widespread support. In contrast, Solana’s use of Rust gives it an edge by providing mature tools and infrastructure.
