Is Layer 2 on Ethereum hard to surpass Solana?

The cryptocurrency market is witnessing complex and unpredictable developments. Recently, in a podcast titled “On Consumer Crypto” on January 10, the co-founders of Web3 Accelerator and Alliance DAO, Imran Khan and Qiao Wang, gave comments on the trends of the market.

Notably, Mr. Qiao Wang revealed an unexpected piece of information: After 10 years of involvement with Ethereum, he sold off his ETH last year, arguing that the currency's growth potential was not much longer.

The decision has sparked a lot of controversy in the community, especially when looking at the current picture of Ethereum: short sales skyrocketed and gas charges dropped to record lows. Is this a sign that Ethereum is slowly losing its lead?

Alliance DAO co-founder sells off Ethereum

In the podcast, Imran Khan argues that “in the current volatile market, the attention of Base supporters has shifted to Solana.”

Qiao Wang also agrees with this view, noting that Solana is showing great appeal in attracting users. While the transition to Solana requires developers familiar with EVM to familiarize themselves with an entirely new set of tools, the benefits it brings in terms of user base and support ecosystem are still well worth it.

In particular, Qiao Wang revealed a surprising information: “I have been holding Ethereum from the earliest days, from the genesis block. However, after 10 years of engagement, I sold out of my Ethereum last year. It is difficult to make this decision after such a long time, but I feel that Ethereum's growth potential is not much.”

In another development, Qiao Wang also talked about his observation and comparison between project development on Ethereum layer 2 and Solana. He said a year ago he didn't see a significant difference between developing projects on Ethereum layer 2 or Solana.

However, after nearly a year of monitoring and evaluation, he found that startups had virtually no transactions or users on Ethereum layer 2, while operating wildly on Solana.

From these observations, Mr. Qiao Wang gave advice to cryptocurrency startups to consider choosing Solana as a project launch platform.

Ambiguous picture on Ethereum: Short selling soars, ETF cash flows in sharply

In the derivatives market, Ethereum short positions have seen a spike, amounting to more than 500% since November last year, reaching record highs.

Specifically, Wall Street institutional speculators on the CME set up the largest Ethereum short position in history on February 10, 2025, with a 40% increase in short sales in just one week and a sharp 500% increase since November 2024.

Although the CME market is betting heavily on ETH's bearishability, the flow of money from ETFs shows a completely different picture. In the past three weeks, ETH has attracted more than $2 billion, including a record $854 million cash inflow in just one week from Wall Street, the highest level ever.

ETH trading volumes were also notable, with spikes on January 21 (the day of the inauguration of the US President) and February 3 (when the market saw a drop).

Currently, Ethereum is trading about 45% lower than its historic peak set in November 2021. Compared to many other major altcoins that fell 70% or more from the peak, ETH's decline was not the largest.

However, ETH's growth rate since 2024 has been slower than that of most other major cryptocurrencies, including Bitcoin.

These contradictory developments have raised many speculations in the community. Some suggest that this could be a form of market manipulation, a cryptocurrency hedge strategy, or simply reflect a negative view of Ethereum compared to competitors like Solana.

Ethereum gas fees fall to record low

Data from Etherscan shows that gas charges on the Ethereum network have fallen below 1 gwei, or about $0.06. These record-low gas charges have led many to question the usage status of the largest layer 1 blockchain network on the market today.

According to JPMorgan, Ethereum is facing stiff competition from other platforms and lacks a clear lead story like Bitcoin.

Despite deploying the Dencun upgrade and preparing to test Pectra in February, most operations on Ethereum have moved to layer 2, reducing demand for the main network and leading to a sharp drop in gas fees.

Notably, Uniswap, one of the most gas-consuming protocols on Ethereum, is also planning to leave the platform to switch to Unichain.

The move could deal a severe blow to Ethereum, especially given that ETH's price has fallen 10% over the past week, currently trading around $2,639.