Ethereum (ETH -3.16%) is the biggest cryptocurrency after Bitcoin, and there’s no shortage of reasons for buying it. And now, there’s yet another reason to consider an investment of $3,000 or even more.
But investors also need to know that there’s an increasing number of arguments for why Ethereum is more suitable for selling rather than for buying, with newer and more agile direct competitors like Solana (SOL -2.26%) being the preferred place to invest. Let’s investigate how the rationale for buying Ethereum is changing, both for better and for worse.
The main leadership team is changing, and likely for the better
As you’ve probably heard, the Ethereum Foundation, which is a nonprofit organization dedicated to expanding the usage of Ethereum while shepherding the development of its ecosystem, is switching up its cadre of senior leaders. These changes come hot on the heels of the coin’s stark underperformance against Bitcoin during the past six months, which saw its price rise just 7% while the most valuable cryptocurrency gained 67%.
There are two main goals of the shakeup. The first goal is to add more technical expertise to the senior ranks, which is intended to direct the chain’s future technical direction in a more forward-looking rather than reactive way. This has particular importance to Ethereum’s chances of fruitfully using its smart contract functionality to become a home for artificial intelligence (AI) agents on the blockchain, which may be a major growth area in the coming years. It may also be helpful in further controlling the chain’s high gas (user) fees, which have proven difficult to reduce despite years of effort.
The second goal is to build better links between the foundation and the participants in the chain’s ecosystem, thereby fostering better relationships with developers and increasing their level of coordination with the foundation as well as potentially with each other. This goal is largely in reaction to the Ethereum community’s high level of internal dissent at the moment, with many complaints being directed toward the Foundation.
The fact that the Foundation is reacting to the chain’s problems with a changeup of leadership is very positive. It contributes to the investment thesis for buying Ethereum, as it shows that the chain’s stewardship is willing to take chances on creating a better future for coin holders. But there’s also a pair of reasons it’s still worth selling rather than buying, even when considering that better times are probably on the way.
Longstanding issues aren’t getting solved, and it isn’t capturing the growth of emerging sectors
Assuming investors are willing to retain their tokens for at least a few years, it makes more sense to buy $3,000 of Solana than of Ethereum, and it might even be worth selling Ethereum. Here are the two main reasons.
As mentioned previously, gas fees on Ethereum remain much higher than on Solana despite some progress in reducing them. Similarly, transaction times on Ethereum remain much slower than on Solana. Right now, the average transaction on Solana is completed in a couple of seconds or less, and costs between a few cents and a fraction of a cent at the lowest. In contrast, the average transaction on Ethereum takes at least a few times as long, and also costs a few times as much under the best of conditions. Under the worst conditions, Ethereum’s transaction times can be many times slower, and cost many times more than Solana’s, which has obvious implications for the adoption of both coins.
For most investors with a long-term mindset, these differences in transaction speed and cost are not notable in terms of actually using the underlying technologies. But for investors who want to hold these tokens, it’s critical to understand that not all investors have the same mindset. And the usage patterns of those other investors may vary dramatically, changing the drivers of demand for both coins.
For instance, Solana is a major chain for short-term speculation in meme coins, as ill-advised as that may be. Ethereum has some meme coin activity as well. But when it comes to a class of coins that are designed for long-term holding about as much as a hot potato is designed to be held when it’s right out of the oven, the friction of using Ethereum and the relative ease of using Solana has an obvious effect. Thus, many investors in meme coins are allocating their capital to projects on Solana. That’s driving more demand for Solana, and it isn’t a trend that shows signs of slowing anytime soon.
It’s possible that the new leadership at the Ethereum Foundation will eventually make the coin worth buying instead of Solana. But for at least the next couple of years, the new management will still be getting oriented and starting to craft and implement any new strategies. And that implies that Solana is going to continue being the better place to invest, at least for a while, because it’s better positioned to capture a larger share of one of the more popular sectors today and tomorrow.
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