Ethereum (ETH) has been underperforming for an extended period, and many investors are seeking explanations. One compelling perspective is that the market is currently undergoing a "changing of the guards." Large Wall Street financial institutions are gradually becoming the new dominant players, taking over筹码 from less established, or "wild," market makers.
Data supports this theory. Over the past year, the market share held by the top 100 Ethereum addresses has been steadily increasing, now reaching 66%. This concentration became especially pronounced following the approval of spot Ethereum ETFs. This trend indicates that ETH is becoming more centralized among major holders.
If these top addresses are consistently buying, why isn't the price rising? This suggests two things. First, major players are actively accumulating ETH. Second, a significant amount of internal churn is occurring within the market. Not only are retail investors selling their holdings, but there is also a substantial transfer of assets happening among these large addresses themselves—a classic sign of a market maker transition.
It's crucial to remember that Ethereum and Bitcoin are the only two cryptocurrencies with spot ETFs in the US. Furthermore, ETH holds a significant advantage over BTC: staking rewards. Once these ETFs potentially begin offering staking—or even restaking—options, they could provide an annualized yield of at least 3% in ETH terms. This represents a form of quasi-risk-free yield that is incredibly attractive, especially when compared to traditional financial products.
This is Ethereum's untapped potential and its most significant hidden bullish catalyst. It's no surprise that traditional financial institutions are strongly motivated to position themselves as the new primary holders of ETH.
However, Ethereum has been a central narrative through two previous market cycles, resulting in a large base of long-term holders and a relatively distributed supply. Consolidating this supply into fewer hands requires time and a prolonged period of consolidation, or "washing out," the market.
Therefore, the price must be suppressed long enough to convince these long-term holders to relinquish their coins—perhaps by shifting to hotter narratives like Solana (SOL). This allows the new dominant players to accumulate a concentrated position. Only after this accumulation phase is complete will these new entities have the incentive to drive the price upward.
This is an open strategy playing out in the markets.
The key for investors is to avoid selling genuinely valuable assets like BTC and ETH. Enduring this long and painful consolidation phase is necessary to achieve the substantial long-term gains these assets are poised to deliver.
Who Are the New Market Makers? When Will the Consolidation End?
The market sentiment tells a story. When Bitcoin hit $99,000, many weren't happy, but散户 are excited about Ethereum at $3,200. This indicates that most retail investors don't hold much Bitcoin, but Ethereum's "carriage is still too heavy"—meaning too many retail investors still hold it, and the process of shaking them out is not yet complete.
The "Ethereum market maker transition" theory has sparked intense debate among both its staunch supporters and fervent critics. Here are some additional reflections on the discussion.
1. The Identity of the New Market Makers
In this consolidation wave, the old guard from the ICO era is being replaced by Wall Street financial institutions. In the future, we might even see nation-state entities become significant holders.
However, an alternative viewpoint suggests the transition is related to Ethereum's shift from Proof-of-Work (PoW) to Proof-of-Stake (PoS). The old mining pools, which lost their continuous profit model post-merge, no longer have an incentive to push the price up. New staking pools may enter, but they haven't accumulated enough筹码 to initiate a rally. Notably, ETH's price hasn't fallen drastically because these new entities are buying at lower levels, providing support.
Yet, since the merge was completed in September 2022, why did this transition not fully occur during the subsequent bear market? Instead, ETH's underperformance became particularly acute in 2024, especially after the ETF approval, with the ETH/BTC ratio hitting new lows. This timing suggests the transition is less about PoW-to-PoS and more about a transfer from ICO-era veterans to Wall Street institutions.
2. Is This Just a Story We Tell Ourselves?
Several market signals lend credence to this theory. The ETF approval, the anticipation of staking within those ETFs, and the observable accumulation by large addresses are all objective, bullish data points.
Fundamentally, Ethereum's core value proposition remains unchanged. It continues to be a hub of innovation, now bolstered by ETF legitimacy and the future potential of staking rewards. With large addresses accumulating, selling your ETH now would mean capitulating at the worst possible time.
3. Acknowledging Ethereum's Challenges
Despite its strengths, it's important to address Ethereum's challenges honestly.
Compared to Bitcoin, Ethereum lacks the same level of recognition and understanding among those outside the cryptocurrency space. Widespread institutional adoption may require these players to first become comfortable with Bitcoin before allocating significant capital to Ethereum.
Compared to other Layer 1 blockchains, especially Solana, Ethereum's primary issue has been an intense focus on infrastructure (Layer 2s, rollups) at the expense of application-layer development. A trend towards "de-Centralization" (moving away from direct consumer applications) has distanced Ethereum's narrative from the practical needs of everyday users. Why would the average user hold ETH if they don't directly interact with its ecosystem? Ethereum desperately needs a new killer app.
The fragmentation of liquidity across its many Layer 2s is a critical hurdle. While the idea of Ethereum leading an army of L2s is powerful, the reality is a松散 alliance of competing chains. This creates a poor user experience and fractures liquidity. Solving L2 interoperability through concepts like chain abstraction is therefore paramount.
4. The "Carving SOL to Seek a Sword" Dilemma (刻 Sol 求剑)
Drawing parallels with Solana is instructive. Solana's own market maker transition occurred rapidly after the FTX collapse, a major, concentrated negative event that forced a sell-off. Ethereum lacks such a clear, catastrophic catalyst. Therefore, its consolidation must rely on time rather than a single event, leading to a prolonged and frustrating period of sideways price action.
Does Solana have disadvantages compared to Ethereum? Essentially, Solana is a high-performance version of Ethereum that prioritizes speed at the expense of decentralization and security. For many, Solana is simply "a faster Ethereum."
Ethereum's immense consensus, vast ecosystem, and robust community are its hidden moats. You cannot defeat WeChat by simply building a smoother WeChat, just as you cannot defeat Ethereum by building a marginally better-performing Ethereum. Market competition is about disruptive innovation, not parallel replacement. Solana, so far, has not delivered a disruptive innovation that constitutes a dimensional打击 on Ethereum; this is its inherent "drawback."
5. Ethereum's "Overloaded Carriage"
The market seems intent on shaking out both small retail investors and medium-to-long-term holders. This is ultimately because Ethereum's "carriage is too heavy." Too many people are bullish on it. Without a major negative event, the only way to consolidate holdings is through a drawn-out period of price stagnation that tests everyone's patience.
While most散户 own little Bitcoin, they almost universally hold some Ethereum. Seeking higher alpha returns, many have chosen the seemingly more promising "second coin" over Bitcoin's "stable" gains. Ironically, this very behavior has made Ethereum's carriage even heavier, contributing directly to the current predicament.
6. The ETH/BTC Ratio: How Low Can It Go?
The ETH/BTC ratio has declined from around 0.05 to approximately 0.03. Could it fall further? The cryptocurrency industry is characterized by long bear markets and short bull runs. With the current bull cycle starting early, a continued extended wash-out period risks consuming the entire bull market window. Therefore, while possible, the probability of a significantly lower ratio from here is considered small.
7. Why Didn't the Transition Happen at Lower Prices?
One reason the transition wasn't completed at lower prices might be the unexpected speed of the ETH ETF approval. Many anticipated this would not occur until the second half of 2024 at the earliest. The surprise approval caused a rapid price increase before large-scale accumulation could be finalized, leading to the current situation of high-price consolidation.
8. Can This Wave Wash Out Justin Sun?
It's worth noting that major players like Justin Sun are notoriously resilient. Reports suggest he holds approximately 700,000 ETH, worth around $2.1 billion at $3,000 per coin. Washing a holder of this magnitude out of their position would require an exceptionally long time and severe market conditions.
9. Should I Swap My ETH Amid the FUD?
With so much Fear, Uncertainty, and Doubt (FUD) surrounding Ethereum, is it time to switch to another asset? The advice from long-term believers is to hold on. If you've already held through an entire bear market, the sunk cost is significant. Selling now often means capitulating right before a potential turnaround. 👉 Explore more strategies for managing market volatility
10. When Will Ethereum Trigger an Altcoin Season?
Predicting the exact timing is impossible. The key is to recognize the trend rather than guess the date. It's akin to knowing winter is coming based on the season, even if you don't know the exact temperature for tomorrow.
Frequently Asked Questions
Q1: What does "market maker transition" mean for Ethereum?
A: It refers to a theorized shift where large, traditional financial institutions (Wall Street) are slowly accumulating ETH, replacing the earlier generation of large holders from the ICO era. This process often involves suppressing the price to acquire筹码 from retail investors.
Q2: What is the biggest advantage of Ethereum over Bitcoin?
A: Ethereum's key advantage is its ability to generate yield through staking. Holders can stake their ETH to help secure the network and earn rewards, currently around 3-4% annually. This feature is not native to Bitcoin.
Q3: Why is the price of ETH not going up if big addresses are buying?
A: The price can remain stagnant during accumulation because large buyers are absorbing sell pressure without creating intense buy pressure that would drive the price up rapidly. It's a process of internal筹码 transfer and slow, strategic buying.
Q4: What is the significance of the ETH/BTC ratio?
A: The ETH/BTC ratio measures the price of Ethereum relative to Bitcoin. A declining ratio indicates ETH is underperforming BTC. Many analysts watch this ratio to gauge relative strength between the two major crypto assets.
Q5: Should I sell my Ethereum because it's underperforming?
A: Market history suggests that selling quality assets during prolonged periods of consolidation often leads to missing out on subsequent rallies. The decision depends on your investment thesis, but many long-term holders advocate for patience during these phases.
Q6: When will the Ethereum consolidation phase end?
A: There is no definite timeline. The transition depends on how quickly large institutions can accumulate their desired positions and whether broader market conditions become favorable. It's a process that requires patience from investors.