Algorithm Trading Company Two Prime Officially dropped An exposure to Ethereum (ETH) says that ETH is currently trading as a memo coin rather than a predictable asset.
According to CEO Alexander Blume, the company is currently exclusively managing and lending to Bitcoin (BTC). He added that the company considers Bitcoin to be the only digital asset that meets institutional standards for liquidity, predictability and viability of long-term investments.
The decision follows a year-long performance difference between BTC and ETH, during which the two Primes issued more than $1.5 billion loans backed by Bitcoin and Ethereum through their lending divisions.
Despite that exposure, the company concluded that Ethereum’s current actions no longer match expectations of risk-adjusted returns that are appropriate for the facility’s portfolio.
Blume wrote:
“ETH’s statistical trading behavior, value proposition, and community culture have failed beyond its attractive value.”
Increased risk of correlation and tail
Quantitative analysis cited by the two Primes shows that Ethereum’s volatility and return structure has been separated from Bitcoin since the November 2024 US election.
Bitcoin exhibits classic average reversal properties suggesting investor trust and dip viewing activity, but ETH continues to decline with limited rebounds.
In a scatter plot comparing 30-day returns with 30-day forward returns, ETH shows sustained negative momentum and lacks the symmetry observed in BTC data.
Furthermore, ETH volatility is similar to that of memokines, such as Dogecoin (Doge). Comparison of volatility over the 30-day range of BTC, ETH, and DOGE shows that ETH is historically distant from a moderate volatility profile and sudden multistandard deviations show a contradictory movement with facility-grade assets.
Weak institutional demand
The two primes also pointed to a widening gap in institutional demand. Bitcoin ETF currently manages more than $113 billion in assets and consumes 5.76% of its total BTC supply. In contrast, ETH ETFs account for just $4.71 billion in assets covering 2.22% of their ETH supply.
Despite Ethereum’s high market capitalization, much of its ETF inflows can be offset by short futures in the underlying trade, further diluting actual demand.
This disparity creates a reflective environment that guides asset managers to devote less resources to promotion, with the inadequate performance of ETH products, reducing vision and investor allocation.
According to Blume, the inability of ETH to maintain sustainable institutional benefits undermines the long-term viability of its core digital asset ownership.
Erosion of Ethereum Value Proposal
Beyond trading behaviour, the two Primes questioned Ethereum’s economic and technical models.
The company noted that new alternatives such as Solana (SOL) are becoming increasingly difficult to make an attempt at Ethereum to act as a popular distributed computing platform.
These new infrastructures offer faster transaction throughput, reduced costs, and improved user experience for delay-sensitive applications such as gaming and payments.
Blume further claimed that the Ethereum Layer-2 network couldnibalize many of the value captures that had previously been linked to the mainnet. In his valuation, the asset does not have a clear monetization model that can support its valuation and utility billing.
Governance and cultural backwinds
The two prime decisions also take into account what it characterizes as a deterioration in Ethereum governance and focus.
Blume described Ethereum’s internal structure as bureaucratic and ideologically rigid and slow to adapt to competitive market conditions. He argued that Ethereum prioritized the ideal of egalitarianism over effective product development and market relevance.
While Bitcoin offers a singular use case focused on as a valuable, decentralized store, the company sees ETH as one of many speculative technology platforms that are not durable.
Blume concluded:
“The problem with ETH and its leadership is that everyone seems to know that.”
