Interpreting Messari's 100,000-word Annual Report (Part 2): ETH underperforming BTC—Is it marginalization or a pricing dilemma?

Author: Merkle3s Capital

This article is based on the annual report The Crypto Theses 2026 published by Messari in December 2025. The full report exceeds 100,000 words, with an official reading time of 401 minutes.

This content is supported by Block Analytics Ltd X Merkle 3s Capital. The information in this article is for reference only and does not constitute any investment advice or solicitation. We are not responsible for the accuracy of the content nor for any consequences arising therefrom.

“Decoding Messari’s 100,000-Word Annual Report (Part 1): Why Did the Market Sentiment Collapse Completely in 2025?”

Introduction: When ETH Starts Underperforming, Where Is the Problem?

Over the past year, ETH underperforming BTC has almost become an unquestioned fact.

Whether in price performance, market sentiment, or narrative strength, BTC continues to be reinforced as the “sole leading asset”:

ETFs, institutional allocations, macro hedging, dollar hedges… every narrative is converging on BTC.

In contrast, ETH’s situation appears somewhat awkward.

It remains the most important underlying network for DeFi, stablecoins, RWA, and on-chain finance, yet it consistently lags in asset performance.

This raises a repeatedly discussed but never seriously dissected question:

Is ETH underperforming BTC because it is being marginalized, or because the market is pricing it incorrectly using a flawed framework?

In Messari’s latest 100,000-word annual report, the answer is neither overly optimistic nor aligned with any particular chain.

They are more concerned with: where is the capital truly landing, and what are institutions actually putting on-chain?

From this perspective, ETH’s “problem” may differ from what most people imagine.

This article will not discuss beliefs, nor compare TPS, Gas, or technical routes. We will focus on one thing:

Using Messari’s data, clarify why ETH is underperforming BTC.

Chapter 1: ETH Underperforming BTC Is Not Unusual

If we only look at the price performance of 2024–2025, ETH underperforming BTC might lead many to an intuitive judgment:

Is there a problem with ETH?

But from a historical and structural perspective, ETH underperforming BTC is not an “abnormal phenomenon.”

BTC is an asset with a highly singular narrative.

Its pricing logic is clear, consensus is concentrated, and variables are minimal.

When the market enters a phase of macro uncertainty, regulatory shifts, and re-evaluation of risk assets by institutions, BTC often takes the first hit and absorbs the premium.

ETH, on the other hand, is entirely different.

ETH plays three roles simultaneously:

Decentralized settlement layer

Infrastructure for DeFi and stablecoins

A “production network” with technical upgrade paths and execution risks

This means that ETH’s price reflects not only “macro consensus” but also multiple variables such as technological rhythm, ecosystem changes, and value capture structures.

Messari explicitly states in the report:

ETH’s problem is not “demand disappearing,” but “pricing logic becoming more complex.”

In 2025, ETH still dominates key metrics such as on-chain activity, stablecoin settlement, and RWA hosting.

But these growths will not immediately translate into asset premiums like BTC’s ETF or macro narratives.

In other words, ETH underperforming BTC does not mean the market is negating Ethereum.

More likely, it indicates that the market currently does not know how to price it.

The real concern is not the “underperformance” itself,

but whether this usage feedback can continue to benefit ETH as an asset when it is heavily used.

This is the core issue Messari is truly concerned about.

Chapter 2: Usage Is Growing, But Value Is Not Keeping Up? ETH’s Value Capture Dilemma

What truly makes the market start doubting ETH is not its price underperformance against BTC,

but a more glaring fact: Ethereum is being heavily used, but ETH itself is not benefiting proportionally.

Messari provides a set of key data:

With the rise of competitive L1s, Ethereum’s share of L1 fees continues to decline.

Solana reestablished its position as a high-performance execution layer in 2024,

Hyperliquid rapidly expanded in 2025 through on-chain derivatives,

Both are squeezing Ethereum’s share in the dimension of “direct monetization of economic activity.”

By 2025, Ethereum’s share of L1 fees has fallen to about 17%,

dropping to the fourth place among L1s.

Just a year earlier, it still held the top position.

Transaction fees are not the only indicator of network value, but they are an extremely honest signal:

Where fees are collected, real trading activity and risk appetite are present.

This is also where Ethereum’s core contradiction begins to surface.

Ethereum has not lost users. On the contrary, its position in stablecoins, RWA, and institutional settlement is more solid than ever. The problem is that these activities are increasingly happening on L2 or application layers, rather than directly reflected in L1 fee income.

In other words: As Ethereum becomes more systemically important, ETH as an asset is increasingly like “diluted equity.”

This is not a technical failure but an inevitable result of architectural choices.

Rollup scaling solutions have successfully reduced transaction costs and increased throughput, but also objectively weaken ETH’s ability to directly capture usage value.

When usage is “outsourced” to L2, ETH’s revenue comes more from abstract security premiums and monetary expectations rather than cash flows.

This is why the market hesitates when pricing ETH:

Is it an asset that compounds with usage growth, or a neutral settlement layer increasingly resembling “public infrastructure”?

This question is further amplified as multi-chain competition intensifies.

Chapter 3: Multi-Chain Is Not a Threat; The Real Pressure Comes from “Execution Layer Replacement”

From a narrative perspective, ETH’s opponents seem to be increasing.

Solana, various high-performance L1s, application chains, even dedicated trading chains, are emerging one after another,

making it easy to conclude: ETH is being marginalized in a “multi-chain world.”

But Messari’s assessment is more calm and more brutal.

Multi-chain itself is not the threat to ETH.

The real pressure is from the continuous replacement of the execution layer, while the value of the settlement layer remains difficult for the market to directly price.

Take Solana as an example:

In 2024–2025, Solana regained its position as the main hub for high-frequency trading and retail activity,

leading in spot trading volume, on-chain activity, and low-latency experience.

But these growths are more reflected in “trading experience” and “traffic density,” rather than stablecoin settlement, RWA custody, or institutional-grade settlement.

Messari repeatedly emphasizes a fact in the report:

When institutions actually put money on-chain, they still prefer Ethereum.

Stablecoin issuance, tokenized T-bills, on-chain fund shares, compliant custody pathways—these most “boring” but critical financial infrastructures—are still highly concentrated in the Ethereum ecosystem.

This also explains a seemingly contradictory phenomenon: ETH’s asset performance is under pressure, but Ethereum’s position as the “blockchain preferred by institutions” is further strengthened.

The problem is that the market does not automatically give a premium just because “you are important.”

When execution layer revenues are split among other chains, and the value of the settlement layer is more about “security” and “regulatory credibility,” ETH’s valuation logic inevitably becomes more abstract.

In other words:

ETH is not facing “substitution,” but being forced to assume a role more akin to “public infrastructure.”

And infrastructure, the more it is used, the harder it is to tell a story of asset premium.

This is where the fundamental divergence between ETH and BTC begins to fully unfold.

Chapter 4: ETH Still Relies on BTC’s “Macro Anchor”

If the previous three chapters answered a question—whether ETH is being marginalized—

then this chapter faces a more brutal and realistic judgment:

Even if ETH is not replaced, it remains deeply dependent on BTC in asset pricing.

Messari repeatedly emphasizes a fact many overlook:

The market is not pricing “blockchain networks” per se, but pricing assets that can be abstracted as macro assets.

In this regard, the divergence between BTC and ETH is extremely clear.

BTC’s narrative has been simplified into three things:

Macro hedge asset

Digital gold

“Currency-like asset” accepted by institutions, ETFs, and national balance sheets

ETH’s narrative, however, is much more complex.

It is both a settlement layer and a technological platform, supporting financial activities while constantly undergoing upgrades and structural adjustments.

This makes it difficult for ETH to be directly included in a “macro asset basket” like BTC.

This difference is especially evident in ETF capital flows.

When ETH spot ETFs first launched in early 2024, the market initially believed: institutions had little interest in ETH.

In the first six months, ETH ETF fund inflows were significantly weaker than BTC, reinforcing the narrative that “BTC is the only institutional asset.”

But Messari points out that this conclusion is misleading.

As ETH prices and the ETH/BTC ratio rebounded in mid-2025, capital behavior began to change.

ETH/BTC rebounded from a low of 0.017 to 0.042, an increase of over 100%.

ETH’s USD price also rose nearly 200% during the same period.

Fund inflows into ETH ETFs began to accelerate significantly.

At times, new inflows into ETH ETFs even exceeded BTC.

This indicates one thing:

Institutions are not unwilling to buy ETH; they are waiting for “narrative certainty.”

But even so, Messari offers a calm conclusion:

ETH’s monetary premium is still a “secondary derivative” of BTC’s macro consensus.

In other words, the market’s willingness to embrace ETH at certain stages is not because ETH has become an independent macro asset, but because BTC’s macro narrative remains valid and spills over into risk curves.

As long as BTC remains the primary pricing anchor in the entire crypto market, ETH’s strength or weakness will inevitably be measured in the shadow of BTC.

This does not mean ETH has no upside. On the contrary, under the premise of BTC’s trend, ETH often has higher resilience and stronger Beta.

But it also means:

ETH’s asset narrative has not yet completed “de-BTC-ification.”

Until ETH can demonstrate lower correlation with BTC over longer cycles, more stable independent demand sources, and clearer value capture pathways,

it will still be viewed by the market as:

A second-layer belief asset built on BTC.

Chapter 5: Will ETH Be Threatened? The Real Issue Has Never Been Win or Lose

By this point, we can answer a repeatedly posed question:

Will ETH be “replaced” by other chains?

Messari’s clear answer:

No.

At least in the foreseeable future, Ethereum remains the default foundation for on-chain finance, stablecoins, RWA, and institutional settlement.

It is not the fastest chain, but it is the first to be permitted to carry real funds.

The real concern is not whether “ETH will lose to Solana, Hyperliquid, or the next new chain,”

but a more uncomfortable question:

As an asset, can ETH continue to benefit from Ethereum’s success?

This is a structural issue, not a technical one.

Ethereum is increasingly becoming “public financial infrastructure”:

Usage is growing

System importance is rising

Institutional dependence is deepening

But at the same time, ETH’s value capture is increasingly reliant on:

Monetary premiums

Security premiums

Macro risk appetite spillovers

Rather than direct cash flows or fee growth.

This is why ETH’s asset performance is increasingly resembling a “high Beta BTC derivative,” rather than a network with an independent pricing system.

In a multi-chain world, execution layers can be competed away, traffic can be diverted, but settlement layers are less likely to migrate frequently.

Ethereum is precisely positioned in this most stable and hardest-to-reward position based on market sentiment.

Therefore, ETH underperforming BTC does not mean failure.

It is more like a role division result:

BTC handles macro narratives, monetary consensus, and asset anchoring

ETH handles settlement, financial infrastructure, and system security

The only issue is that the market prefers to pay premiums for the former and remains cautious about the latter.

Messari’s conclusion is not radical but honest:

ETH’s monetary story has been repaired but is not yet complete. It can surge significantly when BTC trends upward but has yet to prove it can be independently priced outside of BTC.

This is not a negation of ETH but a phased positioning.

In an era where BTC remains the only macro anchor in the crypto market,

ETH is more like a financial operating system built on this anchor.

It is important, it is irreplaceable, but for now, it is not the “first priced asset.”