Summary Every Bitcoin cycle has a different market structure. The two main drivers of this cycle are institutional capital entering the market through spot Bitcoin ETFs and corporate treasury buyers. Ethereum is a technology platform, supporting multiple strong narratives, stablecoins, real-world assets (RWAs), and decentralized finance, all of which are poised for substantial growth in the coming years. Bitcoin enjoys a straightforward “digital gold” story, but Ethereum has to defend its position against both long-standing competitors and a steady stream of new Layer-1 networks. Institutional inflows from spot Bitcoin ETFs and corporate treasuries have driven this cycle’s early strength, while long-term holders have steadily sold into the rally due to improved liquidity and lingering caution from past cycles. For Bitcoin ( BTC-USD ), selling pressure may exceed current institutional buying capacity, potentially reinforcing the traditional four-year cycle and creating a market environment that actually benefits emerging long-term accumulators such as sovereign funds and central banks. Ethereum’s market share has stagnated as new stablecoin-focused chains and alternative platforms increasingly compete for new use cases like Perp DEX and prediction markets. Despite its strong ecosystem and decentralization, declining fee revenue and a shift back to inflationary territory are challenging the value-accrual thesis of ETH as an asset. BTC: Long-term Holder Selling Continuing Every Bitcoin cycle has a different market structure. The two main drivers of this cycle are institutional capital entering the market through spot Bitcoin ETFs and corporate treasury buyers. Both provided a steady bid for BTC, at least during the first half of the year. However, as we noted in the article “ Who’s Selling Bitcoin? Will They Stop? ” , ETF investors are more reactive to market sentiment. They reduce exposure rapidly during downturns and will only stop selling once prices stabilize and macro conditions remain favorable. With BTC holding near $90,000 and expectations for a December Fed rate cut climbing back above 80%, selling pressure from ETF holders has eased. Over the past two weeks, flows have been fairly muted, a noticeable change after four straight weeks of heavy redemptions. On the flip side, long-term holders have acted as a major selling force in this cycle. Although they were significant sellers in all previous cycles, they typically did not begin selling until the market entered its parabolic phase. In this cycle, however, long-term holders' behavior has been very different: they steadily sell into the market ever since the bull run began in late 2024. Their mentality is understandable. First, the entry of institutional capital has provided much deeper liquidity for Bitcoin, allowing long-term holders to offload their positions with minimal slippage. Second, in the previous bull run of 2021, many expected a “supercycle,” which unfortunately ultimately ended in the deepest crypto winter following the collapses of Terra/Luna and FTX. This time, investors are more cautious; many are simply anxious and want to front-run others by selling before the cycle top. We believe this mentality has contributed significantly to the steady selling trend observed in the chart below. Bitcoin 1Y+ HODL chart Without a doubt, Bitcoin has gained significant recognition from institutional capital in this cycle. Public companies, government entities (e.g., Luxembourg , Texas ), or even central banks (e.g., Czech central bank ) have begun accumulating Bitcoin as a reserve asset. However, aside from dedicated Bitcoin treasury companies like Strategy ( MSTR ), none of these public entities can currently purchase Bitcoin at scale due to the constraints of their institutional and regulatory nature. As a result, selling pressure from long-term holders may outsize the available bid in the market, potentially reinforcing the traditional four-year cycle, where the bull run ends in Q4 following the halving year, and which is now. In fact, this type of market environment may be exactly what these new entrants prefer. Public entities such as sovereign funds and central banks are not buying Bitcoin for trading purposes; they accumulate it for its role as a neutral reserve asset. A bear market is actually favorable for them, as it allows steady accumulation at more attractive prices. ETH: Market Share Stagnated Bitcoin benefits from a single, powerful narrative: digital gold. Investors who want to hold a neutral, digital reserve asset have one obvious choice. By contrast, Ethereum ( ETH-USD ) is a technology platform, supporting multiple strong narratives, stablecoins, real-world assets (RWAs), and decentralized finance, all of which are poised for substantial growth in the coming years. These use cases require a robust smart-contract platform. But this raises an important question: Why would developers and institutions choose Ethereum instead of alternative platforms? For Stablecoins, issuers are developing their own chain Ethereum has long dominated the supply of the two largest stablecoins, USDT and USDC. However, this has begun to change in recent months. Both issuers, Tether ( USDT-USD ) and Circle ( USDC-USD ), are now developing their own blockchains specifically designed to support their respective stablecoins. In our article " The Rise of Stablecoin-Focused Blockchains ", we explore these emerging stablecoin-focused chains and their potential impact on the current leading settlement chains for stablecoins: Ethereum and Tron ( TRON-USD ). The rise of these dedicated stablecoin L1s raises big questions for existing networks that currently handle the bulk of stablecoin traffic – notably Ethereum (home of USDC and many other stablecoins in DeFi) and Tron (the chain that, thanks to low fees, carries a huge portion of USDT transactions today) In the immediate future, Ethereum and Tron are unlikely to lose their dominance overnight. They have large established user bases, integrations with exchanges and wallets, and liquidity deep in DeFi and CeFi. Newcomer chains like Arc or Stable will need time to ramp up. Looking further out, these new L1s could significantly alter the market share in stablecoin settlement. If Arc, Stable, Tempo, and Plasma achieve their goals, a growing chunk of stablecoin transactions (especially high-volume and enterprise transactions) may relocate off Ethereum and Tron onto these specialized chains. For DeFi and Dapps, Ethereum failed to capture more market share Total asset value, a common metric for measuring DeFi activity, has long been concentrated on Ethereum, which currently accounts for more than 67% of total TVL. This figure is often cited as evidence that Ethereum remains the most important chain for DeFi. However, it should be noted Ethereum share of total TVL has been at around 60% level since 2021. Ethereum has failed to capture more market share for the past 4 years. And all top emerging decentralized applications in this cycle, such as perp DEX - Hyperliquid or prediction market - Polymarket, are all not developed on Ethereum. Declining Fee Revenue Ethereum has been actively implementing network upgrades to enable lower fees, particularly for its Layer 2 (L2) networks, in response to the competitive landscape set by high-speed, low-cost Layer 1 blockchains like Solana ( SOL-USD ). In the most recent upgrade, Fusaka aims to further expand blob capacity and lower transaction costs, potentially boosting Layer 2 activity. However, while a lower fee means better usability, at the same time, it means lower network revenue and higher ETH inflation rate. Ethereum's fee mechanism (EIP-1559) burns a portion of transaction fees. When network activity and fees are high, the burn rate can exceed the issuance rate (rewards paid to stakers), making ETH deflationary. With the ever lower fees, ETH has already begun as an inflationary asset. Ethereum Fee Revenue has been declining since 2025 Source: Ethereum Revenue | Token Terminal And ETH has shifted back into inflationary territory since April 2024. Source: Dune Bitcoin enjoys a straightforward “digital gold” story, but Ethereum has to defend its position against both long-standing competitors and a steady stream of new Layer-1 networks. Ethereum’s strengths - its large developer base, strong decentralization, and deep application ecosystem - remain meaningful, but they’re not enough to rest on. The network needs to keep improving and reinforce how value ultimately flows back to ETH as an asset. Disclaimer: The information provided herein does not constitute investment advice, financial advice, trading advice, or any other sort of advice, and should not be treated as such. All content set out below is for informational purposes only. Original Post Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
