Zaheer Ebtikar Analyzes Ethereum’s Underperformance and Capital Flows
Zaheer Ebtikar, the Chief Investment Officer (CIO) and founder of Split Capital—a hedge fund specializing in liquid token investments—has attributed the recent underperformance of Ethereum to strategic missteps by the Ethereum Foundation and shifts in crypto capital flows. In a detailed analysis shared via X (formerly Twitter), Ebtikar highlighted key factors impacting Ethereum’s price movements.
Understanding Capital Flows in the Crypto Market
Ebtikar emphasized the significance of analyzing capital flows within the crypto market, identifying three main sources: retail investors, private capital from funds, and institutional investors. He noted that retail investors are challenging to quantify and are currently not fully active in the market.
Private capital, which was a dominant force in 2021, has seen a decline due to poor venture investments and previous market cycles’ overhang. This shift has led to traditional vehicles like ETFs becoming the primary new buyers of crypto assets. Venture firms and liquid funds have adapted by focusing on more liquid plays outside of Ethereum, such as Solana and Celestia, to explore growing markets beyond Ethereum-based investments.
The Impact of Institutional Capital and ETFs
Ebtikar observed that the emergence of spot Bitcoin ETFs like IBIT and others exceeded expectations in the market, becoming some of the most successful ETF products in history. This success highlighted Bitcoin as the primary asset attracting institutional capital, while Ethereum and other altcoins faced challenges in capturing investor interest.
Institutional investors began reassessing their portfolios, leading to a divergence in asset returns and increased dispersion between different cryptocurrencies. Ethereum, once a core holding, started losing ground to assets like Solana and memecoins as institutional capital shifted its focus.
The Future Outlook for Ethereum
Ebtikar outlined potential strategies for Ethereum to regain investor confidence, including attracting institutional investors through ETFs and making strategic changes within the Ethereum Foundation. He acknowledged Ethereum’s unique position as one of the few assets with an ETF, offering a potential pathway for recovery.
Looking ahead to 2025, Ebtikar highlighted the critical importance of the upcoming year for Ethereum and the broader cryptocurrency market. He expressed cautious optimism for Ethereum’s prospects, noting that strategic shifts and institutional adoption could play a crucial role in its recovery.
Conclusion
Despite facing challenges in recent months, Ethereum’s future trajectory remains uncertain but potentially promising. As the crypto market continues to evolve, the role of institutional capital and strategic decisions within the Ethereum ecosystem will be vital in determining Ethereum’s path forward.
At the time of writing, Ethereum (ETH) is trading at $2,534.
Featured image created with DALL.E, chart from TradingView.com