Ethereum market share drops to 13.1% despite recent upgrades

Binance Research recently analysed Ethereum’s (CRYPTO:ETH) role in the cryptocurrency ecosystem, noting a significant decline in its market dominance.

Despite a series of positive developments for Ethereum, including the Dencun upgrade, which aimed to reduce transaction fees, the platform’s market share fell to a multi-year low of 13.1%.

“Ethereum’s dominance, measured as its market cap relative to the total crypto market cap, has been on a downward trajectory throughout the year, reaching multi-year lows of 13.1%. This decline is particularly striking against a bullish macro backdrop, where risk-on sentiment has surged,” according to Binance Research.

The release of the Dencun update, designed to cut fees, inadvertently led to a 99% drop in Ethereum’s revenue, alongside a noticeable dip in network activity.

In addition, the growing popularity of Layer-2 solutions has further diminished Ethereum's position.

Binance Research attributed the decline to the rising usage of Layer-2 networks, which provide lower fees and more scalability.

Despite the approval of Ethereum ETFs in the US, which has opened new avenues for institutional investment, Ethereum’s trading volumes have stagnated, trailing behind competing Layer-1 platforms like Solana (CRYPTO:SOL).

Binance Research notes that Ethereum faces a crucial choice between enhancing its Layer-1 capabilities or focusing on Layer-2 solutions to regain dominance.

“Ambiguity in Ethereum’s objectives — between a rollup-centric roadmap and broader goals — creates market uncertainty. Aligning on a cohesive mission statement would strengthen Ethereum’s narrative and product strategy,” the report concluded.

The future of Ethereum may hinge on how it addresses this internal debate and navigates the competition in the evolving cryptocurrency landscape.

At the time of reporting, the Ethereum price was $3,972.92.