Bitwise CIO likens Ethereum to Microsoft, bets on underappreciated dominance despite bearish sentiment

Bitwise Chief Investment Officer Matt Hougan believes that Ethereum to tech giant Microsoft in a recent memo, asserting that the blockchain giant’s foundational role in the ecosystem is being underestimated amid current bearish sentiment.

In the memo titled “A Contrarian Bet on Ethereum,” Hougan argued that Ethereum continues to lead in key sectors despite growing competition and skepticism.

Market challenges

Ethereum has faced significant headwinds in recent months, with the ETH/BTC ratio recently hitting a three-year low, reflecting its underperformance relative to Bitcoin.

Ethereum’s price remains flat year-to-date, while Bitcoin has surged 38%, and competitors like Solana are up 31%. This has contributed to what Hougan described as a tough environment for Ethereum, with market sentiment turning negative. He identified several key challenges Ethereum faces, including election-related regulatory risks.

According to Hougan, Bitcoin has largely passed regulatory scrutiny, but Ethereum remains under examination by the SEC, particularly in relation to staked ETH and the DeFi ecosystem. Additionally, rising competition from newer blockchains, such as Solana, is also applying pressure by offering higher throughput and lower costs.

Additionally, Ethereum’s tokenomics have shifted as transaction volumes migrate to Layer-2 networks like Base, Arbitrum, and Optimism. While these networks have driven activity, they have also reduced revenues on Ethereum’s core Layer 1 blockchain, which is now at a four-year low.

Hougan acknowledged that these factors have contributed to a bearish outlook for Ethereum.

Real-world applications

Despite these challenges, Hougan emphasized that Ethereum remains the dominant platform for key blockchain applications. He pointed out that over 60% of DeFi assets are locked on Ethereum, and more than half of all stablecoins are issued on the platform.

Hougan also highlighted that when major institutions like BlackRock sought to build a tokenized…