Has Ethereum become an Ethereum pit? Should we give up on ETH?

Source: Talking about Li and the Outside

Today is the fourth day of the Lunar New Year. I originally thought about visiting the temple fairs at Ditan or Chaoyang Park, but it seems a bit pointless. Instead, let's chat with everyone about the market over the past few days.

Coincidentally, yesterday was also Vitalik Buterin's birthday (January 31, 1994), and I noticed that the partners in the group were discussing ETH quite a bit. Of course, it wasn't to celebrate Vitalik's birthday; it seems that due to ETH's price performance, the way people refer to this Ethereum founder has changed: V God --- V Boy --- V Dog --- V Hound.

For a while now, many people have been FUDing Ethereum, and "Ethereum" seems to have become "Ethereum Pit." Recently, the most common questions in the backend messages are still related to ETH's price. For example, some partners ask: they can't hold on anymore, should they swap ETH for SOL? Others might ask: how high do you think ETH's price can go?…

From my personal perspective, many partners seem to dislike reading articles and prefer to jump straight into asking various questions, hoping to get corresponding effective solutions. In fact, if you often read articles from Talking about Li and the Outside, you would know that we have always been optimistic about Ethereum's long-term development.

Let me casually mention a few recent articles as examples. For instance:

In the article from January 14, we mentioned: I personally still have faith in Ethereum. Not to mention the long-term, after all, ETH is currently the only cryptocurrency besides BTC that has been approved for a spot ETF. Perhaps we still need to maintain a bit of patience with Ethereum. Currently, ETH remains second only to BTC, and as long as Ethereum can find a new balance in L2 expansion and other narrative waves, then price won't be an issue. Let the bullets fly a bit longer.

In the article from January 16, we mentioned: If the Trump administration can really introduce some favorable policies for cryptocurrencies, this could open the green light for further prosperity in the crypto market. Meanwhile, if staking is allowed under regulation this year, it would be a good boost for the currently sluggish ETH, and DeFi would also see further revival and development.

In the article from January 21, we mentioned: We continue to be optimistic about Ethereum's performance; $4000 is likely not the end of this round of the ETH bull market.

Of course, if you still really don't know how to make a choice, there's a simplest way: just hold both ETH and SOL. Only children do multiple-choice questions; adults want them all, provided you manage your capital allocation according to your position and risk preference.

Many people like to compare, for example, directly comparing their ability to make money with others. Seeing someone making millions of dollars in a day with meme coins makes them think they can do it too. Similarly, some like to directly compare the price increases of two projects (tokens), believing that the one with a larger increase is a good project, while the one with a smaller increase is a garbage project.

If we compare ETH and SOL alone, in terms of investment return and relative valuation, ETH indeed lags behind SOL significantly. As shown in the image below.

Moreover, in this cycle, ETH has only increased about 4 times from around $800, while SOL has increased about 30 times from around $8.

But is SOL really better than ETH?

Strictly speaking, neither ETH nor SOL is perfect. In terms of speed, SOL is faster than ETH; in terms of fees, SOL is cheaper than ETH. However, in terms of security and stability, ETH is better than SOL.

Currently, SOL's on-chain activity and trading volume are indeed quite good, and new projects are explosively deployed like mushrooms after rain, especially meme coin projects (tokens). But if you monitor carefully, you might find that many projects deployed on the SOL chain may declare death or zero within days or weeks. Trying to make big money on this chain is like a high-end PVP finals.

Although there are similar situations on the ETH chain, relatively speaking, the situation is much milder.

The development of things always goes through stages; we cannot only see the peak and ignore the mess that may follow. For projects that hope for long-term development and stable operation, ETH still appears to be the best choice at present.

As I said before, it mainly depends on whether you want to speculate or invest, whether you want to make quick money or slow money. If you enjoy speculation, you can certainly participate in various chain PVP events and see who enters early and runs fast. But if you are pursuing a more long-term investment outcome, you shouldn't focus solely on the current price. As long as the fundamentals of the corresponding project are still intact, just hold on and wait for opportunities.

Alternatively, if you still don't know what to do, you can take a look at how WorldLibertyFi (WLFI), supported by the Trump family, is doing: from monitoring the public wallet addresses, WLFI has recently been buying ETH, and about 50% of their holdings are ETH. As shown in the image below.

If you think WLFI is not enough, then take a look at BlackRock, which reportedly bought 24,529 ETH today (February 1). As shown in the image below.

You may not think much of ETH, but institutions like WLFI and BlackRock are buying and buying. You may always feel that BTC is too expensive and don't want to buy, but MicroStrategy keeps buying and buying, as shown in the image below.

In short, while institutions are openly making big moves, you insist on listening to some bloggers or KOLs online and betting on those garbage coins or meme coins that you completely don't understand, only to end up losing money or going to zero and attributing it to bad luck or not running fast enough. What more can we say?

Recently, various institutions and celebrities have been launching their own meme coins, especially TRUMP, which seems to have become a hot topic at many elderly people's dining tables during the Spring Festival. On one hand, this may mean that many elderly people will enter the market and lose their savings and retirement funds. On the other hand, this is a good thing for the crypto market, as it means more liquidity injection.

As of the writing of this article, the total market cap of stablecoins in the crypto market has surpassed $206 billion, especially increasing by $38 billion since Trump announced his victory (November 2024). From this perspective, the current market is still overall healthy, indicating that funds continue to flow into the crypto market. As shown in the image below.

From the market's perspective, we will continue to maintain the positive view from previous articles and are optimistic about this year's overall performance and potential opportunities. However, higher positions also mean greater risks. It is not a bear market now, but we need to prepare for a bear market in advance, just as we prepared for a new round of bull market in 2022. We tentatively plan to reconsider a new round of periodic investment plan in 2026.

Any trading carries certain risks; there is nothing in the investment field that guarantees you will make money 100%. What we need to do is continuously optimize our strategies to improve our chances of making money (win rate). Moreover, while making money, we must also consider the possibility of losing money. For example, before I make any operation, I habitually list two plans (Plan A, Plan B) simultaneously: if I make money, I can hold on; if I lose money, I can afford to lose. This is what is meant by proper position and risk management. The hardest part of a bull market is not making money but keeping the money.

Additionally, don't forget the two fundamental principles we've repeated many times in previous articles: for most people, the most important principles in investing are: preserve capital and don't touch what you don't understand.

At the end of the article, let's briefly review what other noteworthy or interesting things have happened in recent days:

• The Federal Reserve has kept interest rates unchanged at 4.25% - 4.50%. It seems that the first rate cut this year may be in June.

• Venice (a private, uncensored AI project) announced it will airdrop 25% of its VVV token supply to holders of major AI protocols like Virtuals and Aixbt. It is said that many partners received a feast of pig's feet, indicating that some new things are worth trying; you never know when a feast might fall into your lap.

• Jupiter announced a large-scale buyback plan for the JUP token, with 50% of the protocol fees used to purchase JUP. This is indeed good news for JUP holders, as it has already reflected in the token price performance.

• Pump Fun is facing a class-action lawsuit for allegedly selling unregistered securities (the lawsuit was filed in the Southern District of New York Federal Court). It is said that investors who lost money buying meme coins are angrily suing, claiming that all tokens created on the platform are securities (violating securities laws). Pump Fun has collected nearly $500 million in trading fees in just over a year, igniting a frenzy of token issuance on Solana. It seems that being too big attracts too much attention, but in the U.S., it is still free; if you lose money on meme coins, you can sue the platform.

• Grayscale has submitted an application for an XRP ETF to the New York Stock Exchange.

• Tether (the issuer of USDT) released a proof report for the fourth quarter of 2024, showing a profit of $13.7 billion last year. What does it mean to make money while lying down? This is it.

• It is said that SBF (who once led FTX and SOL) parents are seeking a pardon from President Trump for their son. Here’s a little drama: when SBF gets out of prison, he quietly takes out his long-stashed SOL, laughs out loud, and secretly says: CZ, I'm going to get you.

• European Central Bank President Christine Lagarde stated that BTC will not enter the reserves of EU countries, citing issues with Bitcoin's liquidity, security, and regulation. How should we understand this? Does it mean that when a woman says no, she actually means yes?

• The Czech Republic Central Bank is considering a proposal to invest $7 billion in BTC as a reserve asset.

• MicroStrategy has raised $563.4 million through Perpetual Strike Preferred Stock, indicating they will continue to buy more BTC.

• MetaPlanet (a Japanese company imitating MicroStrategy) issued 21 million stock options, raising 116 billion yen (about $747 million) to purchase Bitcoin, which will become the largest Bitcoin purchase in Asian stock market history.

• Swarms (a token that has joined the 10th batch of Binance Alpha projects) announced via the X platform that holding only 2% of the team's tokens is a mistake, and they are launching a proposal to increase the team's tokens to 10%. Ha, ha, ha…

That's all for today.