Ethereum price lags Bitcoin and altcoins, but rally to $2.6K possible?

The price of Ether (ETH) fell by 7.3% between October 1 and October 8, erasing the gains made in the previous two weeks. This decline reflects activity in the broader altcoin market, suggesting that the decline was not driven by factors unique to the Ethereum ecosystem. As a result, traders are unsure about Ether's ability to retake the $2,600 level.

Since September 1, Ether has decreased by 2%, the price of the altcoin market has increased by 4.5% in the same period, the sentiment of investors is mixed. This difference may be due in part to the lack of startups of ether exchange-traded funds (ETFs) in the US. These ETFs saw no net inflows as of Oct. 7 and have experienced a combined $548 million in expenses since their launch in July, according to data from Farside Investors.

Ethereum Daps faces strong competition

Adding to investor frustration is growing competition from blockchains that prioritize scalability, such as Solana (SOL), BNB Chain (BNB), Tron (TRX), Avalanche (AVAX), and Sui. Despite being criticized for the risk of centralization, these networks have accumulated a total locked value (TVL) of $19.5 billion, which is equivalent to 43% of Ethereum's $45.6 billion deposit.

In addition, Ethereum's decentralized exchange (DEX) rate has dropped significantly, from 64% in January 2023 to just 22% now, with Solana now leading the way. This trend has cast doubt on Ethereum's market leadership, causing traders to worry about potential downward pressure on Ethereum's price.

While Ether bulls work on layer-2 scaling solutions like Base, Arbitrum, Polygon, and Optimism, it can be argued that Ethereum still holds the lead. Notably, Baez has made significant strides, capturing 14 percent of the market share — up from less than 1 percent seven months ago.

Among the key highlights in the Base network are Aerodrome, which facilitated $2.93 billion in trades last week, and Uniswap, which saw $1.36 billion in trades during the same period. On the Optimism network, the leading decentralized exchange (DEX), Velodrome, recorded $360 million in volume, while Camelot on Arbittrum recorded $554 million in trading volume over the past seven days.

However, layer-2 networks use aggregation techniques and take advantage of data storage optimization (blob space), introduced in June 2023, to significantly reduce base layer charges. Despite the growth of the Ethereum ecosystem, the number of transactions on the underlying network has remained relatively stagnant. , which partly explains the frustration among ether investors.

The slow movement on the Ethereum network has caused some unwanted consequences. When there is less competition for processing power, Ether becomes more expensive, as reduced demand for cap space and lower transaction fees reduce the incentive for validators to secure the network.

Related: Blockchain Activity Soars 70% in Q3 Driven by AI DApps

Blackrock highlights Ether's “at-risk” value proposition

Unexpectedly, the ether's potential turning point may come from a surprising source. On Oct. 3, BlackRock, one of Ether's ETF providers, emphasized that Ether's value proposition is more in line with “at-risk” assets, making it competitive with stocks and venture capital. This contradicts the mainstream narrative of Bitcoin as “digital gold”, as posted by Bruce Florian, a German Bitcoiner and content creator.

Complicating the outlook, S&P Global Vice Chairman Daniel Yargin told CNBC that the global economy is entering a “dangerous period” as tensions in the Middle East escalate and oil demand from China declines. Even as the National Development and Reform Commission released details of its proposed economic stimulus plan, more worrying was the fact that mainland China's CSI 300 stock market index closed down 9 percent on October 8.

With investors' risk appetite waning and Ethereum facing stiff competition, the chances of Ether regaining the $2,600 level are slim, at least in the short term.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.