Have investors lost confidence? FETH has flowed out 282 million pounds in three days. How does Fidelity research interpret Ether and Solana coins?

According to SoSoValue data, on January 7th, 8th, and 10th, a total of 67 million, 147 million, and 65 million FETH (Ether Spot ETF) respectively flowed out from Fidelity. In a short period of time, there was a net outflow of 282 million. Combined with the recent attitude of the Federal Reserve towards interest rate cuts and the overall performance of cryptocurrency prices, it also raises doubts about whether some investors have lost confidence in the bull market and chosen to exit. I will organize a part of Fidelity's 2025 outlook on Ether, including a comparison with its competitor Solana.

(Ether developers talk about the development dilemma, revealing that Ether has deviated from the right track)

Layer 2 Parasitic? Or Symbiotic? Fidelity: Shorting and Going Long

First of all, let's talk about the Cancun upgrade of Ether in March. Although many people afterwards believed that Layer 2 is a parasite of the Ether mainnet, and even the argument that Layer 2 is the killer of Ether, with the significant drop in fees for Layer 2 after the Cancun upgrade and the seizure of Ether's transaction volume with low transaction costs. However, Max Wadington, an analyst at Fidelity, believes that the income from blob is unlikely to offset the drastic reduction in income brought about by the upgrade in the short term, but it will bring long-term positive effects.

(What impact does the Cancun upgrade have on users? Key points from the Chain News offline gathering at Ramble Bar)

Fidelity believes that the relationship between Layer 2 and the Ether network is symbiotic. The Ether network benefits from the transaction fees of Layer 2, and promotes widespread adoption of the Ether network while maintaining decentralization. Layer 2 inherits some security and liquidity from the Ether network. As long as the Ether network can provide cheap data availability and huge liquidity to Layer 2, this symbiotic relationship can be maintained. The author adds: EigenDA's underperformance may also be related to the highly competitive cheap data availability of the Ether network mainnet after the Constantinople upgrade.

Fidelity further stated that the changes brought by the Blob in the figure below are long-term positive. This does not mean that Ether Square has completely abandoned future cash flow. The most likely ultimate goal in the future is that cash flow will naturally increase after significant growth in the Layer 2 network, because the growth difference adopted relative to the issuance growth is positive. Fidelity also predicts that there will be more Layer 2, especially application chains (such as ENS), by 2025.

Source: Fidelity Ether Fund has lower speculation dependence and more stable performance

Vanguard believes that fundamentals are the most important for long-term investors. Ether performed strongly in terms of developer activity, TVL, and stablecoin supply. In contrast, Solana's revenue and TVL growth rate are faster than Ether, and it gained greater community attention in 2024.

Fidelity also warned that most of Solana's revenue comes from meme coin trading, which they see as a cyclic trend of strength during bull markets but significant decline during bear markets. However, similar arguments apply to the high dependence of Ether transactions on Uniswap. Although these two cases are similar, Fidelity believes that the fundamentals of Ether are slightly less speculative and may have better stability in the long run.

Fundamentals do not necessarily indicate good or bad performance, price trends revolve around narratives.

Regarding the updates of both in 2025, Fidelity believes that Solana may become a more prominent competitor in 2025. The highly anticipated Firedancer upgrade of Solana promises a substantial increase in transactions per second (TPS), while the Prague/Electra upgrade of Ether is not expected to cause much controversy, as it does not significantly impact the value proposition of Ether. From an investment perspective, its impact is relatively small.

Currently, the biggest advantage of Ether compared to Solana is that it has already passed regulatory scrutiny and successfully issued ETFs, although this advantage may disappear at some point. In the short term, Solana seems to have more positive factors compared to Ether, but investors complaining about the weak price of Ether in 2024 actually provide significant upward potential for Ether. Just like Solana previously experienced the FTX event and then welcomed the big picture of 2024.

The continuation of the price may make investors pay more attention to the fundamentals, which may lead them to turn back to Ether. However, Fidelity also reminds that the fundamentals do not necessarily predict which one will perform better within a year. Short-term price trends often revolve around narratives.

Has investors lost confidence in this article? FETH has flowed out 282 million pounds in three days. Interpret how Fidelity research report views Ether and Solana, which first appeared on ChainNews ABMedia.