Source: Monthly Outlook: The Great Ethereum vs Solana Debate
Author: David Duong, CFA - Global Head of Research
Translated by: Lenaxin, ChainCatcher
ChainCatcher Editor's Summary
This article is compiled from the latest monthly outlook research report released by Coinbase. The report points out that as the crypto market gradually warms up, institutional investors' focus is shifting from Bitcoin to other crypto assets such as Ethereum and Solana. Despite the increased attention, the price trends of Ethereum and Solana in the short term will still be more influenced by technical factors.
Overview
Institutional funds continue to flow into the BTC market, with Bitcoin currently accounting for 63% of the total cryptocurrency market capitalization. However, the market's focus is recently turning to mainstream tokens like ETH and SOL, which are showing valuation advantages against the backdrop of Bitcoin's historical high.
Key factors affecting next quarter's market include:
The approval progress of spot ETF by the US Securities and Exchange Commission.
The possibility of incorporating Staking functionality into ETF products.
Continued entry of institutional funds.
- It is worth noting that the crypto community has long had a tendency to compare ETH and Solana in opposition, but in fact, their technical routes and investment logic are showing differentiated development and have the market space for parallel development.
The current crypto community generally simplifies the competition between Ethereum and Solana to a "choose one" proposition, but in fact, their technical architectures and investment logics are showing differentiated development and the possibility of parallel development.
For example, institutional participants are increasingly using ETH as a proxy for the broader real-world assets (RWA) theme - covering a wider range of areas including stablecoin, payment, and tokenization.
Solana's investment concept is focused on its network's advantages over competitors in terms of speed, user engagement, and revenue generation. Although its activities are mainly concentrated on meme coin trading, it has also gained attention in other areas.
In the short term (Q3 2025), against the backdrop of an overall improving market, the market momentum of these two tokens will be more driven by technical factors (i.e., supply and demand factors) rather than fundamentals, with the substantive impact of network technical upgrades potentially being relatively limited.
False Dichotomy
The technical route debate between Ethereum (ETH) and Solana (SOL) has long influenced institutional investors' value assessment of blockchain platforms. Market views are clearly divided: traditional institutional investors generally value Ethereum's security and decentralization characteristics, making it an important infrastructure in the real-world assets (RWA) tokenization field; while supporters argue that Solana has competitive advantages with higher transaction speeds and lower costs. As Ethereum's Layer 2 expansion solutions continue to develop, this technical discussion is becoming more complex.
Table 1. Comparison of Ethereum and Solana Network Indicators
These arguments are a false dichotomy, not because the technical differences are not real or important, but because the reasons for engaging with ETH, SOL, or both at any given time are more sensitive to market conditions.
When Will the Altcoin Season Arrive?
A significant difference in the current cryptocurrency cycle compared to previous cycles is the absence of an altcoin season. Data shows that over the past year, many retail investors have been severely hit while trading meme coins and long-tail altcoins, leading to insufficient funds or a strong wait-and-see sentiment. In this context, although some altcoins have recently performed better than ETH and SOL, their price trends still make many institutional investors tend to hold large-cap stocks.
ETH's Turning Point
In early May, the ETH market experienced a large-scale short liquidation, with clearing scale significantly rising. Figure 1 shows that in May, approximately $897 million (374,000 ETH) of ETH shorts were liquidated, compared to $575 million in April and $467 million in March. This triggered a technically driven surge, highlighting the large number of over-positioned shorts in ETH, causing short covering and subsequent margin calls. As a result, this also began to limit ETH's ability to fight against long-tail altcoins as a financing currency, a strategy many market participants adopted in the past 12-18 months.
Figure 1. ETH Short Futures Liquidation Volume Rebounded in May
In fact, ETH's beta relative to the cryptocurrency market (represented by the COIN50 index of the top 50 crypto assets by market cap) rose back to near 1 in mid-June. (ETH's beta has fallen to 0.92 in July, though still higher than SOL's 0.81 and BTC's 0.32). In other words, ETH's returns are currently in sync with the overall cryptocurrency market performance. See Chart 2. Therefore, this makes ETH an attractive option for a barbell strategy to counter tokens further along the risk curve, as these ETH long positions can help anchor tokens with higher risk exposure and asymmetric upside potential.
Figure 2. ETH's Beta Relative to the Crypto Market is Very Close to 1
Meanwhile, proposed upgrades such as EIP-9698 (raising the Ethereum gas limit from 36 million to 3.6 billion) and EIP-7983 (limiting the maximum gas amount per transaction) have limited effect on ETH performance. These technical improvements primarily focus on increasing transaction throughput and block execution efficiency. The more significant market change currently is the growing interest of institutional investors in tokenized stocks and risk-weighted assets (RWA), with related infrastructure tokens receiving more funding attention as investors speculate on potential platforms for these assets.
Figure 3. Stablecoin Network Transfer Volume (USD)
Solana Ecosystem Expansion
On the other hand, dune analytics index shows that since the end of the second quarter of 2024, Ethereum's share in on-chain activity has been continuously declining, while Solana currently occupies 44% of total blockchain activity. Figure 4 displays this index data, which tracks blockchain adoption by combining three key metrics: transaction fees (weight 45%), USD transfer volume (weight 45%), and transaction count (weight 10%). Fees and transfers have higher weights as they better reflect meaningful activity. This trend indicates a fundamental shift in blockchain adoption patterns over the past year.
Figure 4. Comprehensive View of On-Chain Adoption
Solana network activity is primarily driven by meme coin trading, especially since the launch of pump.fun in January 2024, which became the main driver of Solana's expansion. The challenge for Solana is that interest in meme coins may peak in early 2025, with data showing that over 60% of mature meme coin projects originate from the letsBONK.fun platform. Market observations suggest that the meme coin trading frenzy might peak in early 2025 but is expected to maintain some market activity. With events like the first issuance of the PUMP token on July 12, investors can now participate in the meme coin market through multiple channels, no longer limited to simply going long on SOL tokens.
Nevertheless, stress-testing Solana's ability to handle massive transaction volumes could help it achieve product and market fit with other growing areas of the crypto ecosystem. In fact, Solana recently launched the Solana Attestation Service as a KYC/AML layer to serve capital market opportunities. The Solana Foundation also released a whitepaper in May titled "Tokenized Stocks on Solana: A New Paradigm for Capital Markets," further clarifying its positioning in the traditional financial asset digitization domain.
Figure 5. "Graduated" Token Proportion and Active Addresses Comparison
For now, SOL price will be more driven by technical factors, such as the growing demand for enterprise fund management tools and capital inflows from the US spot SOL ETF, with regulatory information suggesting these SOL ETFs could be approved as early as this quarter. (The REX-Osprey Solana + Staking ETF is not officially approved by the SEC, but the SEC revealed a new framework that might shorten future ETF approval times.) Technically, some meaningful upgrades may be imminent, such as Solana's Alpenglow proposal—a transformative upgrade that will replace the current consensus mechanism by accelerating consensus through local timers and off-chain voting mechanisms. This aims to improve network performance and reduce validator costs. However, market analysis indicates that the current SOL price fluctuations have limited correlation with these technical upgrades.
Enterprise Demand
In 2025, enterprise financial tools significantly increased their cryptocurrency holdings, adding over 825,000 ETH (worth $3 billion as of July 18) and 2.95 million SOL ($531 million) across 14 dedicated purchasing entities. See Figure 6. Moreover, many such companies have committed to staking their ETH and SOL for yields, with some even locking their supply through DeFi integration, demonstrating a strategic shift from short-term trading to long-term asset allocation. In fact, these tools' preference for ETH and SOL is partly due to their yield generation potential, further amplified by media coverage of stablecoins and tokenized securities. According to previous monthly outlook reports, enterprise balance sheets will remain the primary driver of cryptocurrency market demand in the second half of 2025.
Figure 6. Top ETH and SOL Enterprise Financial Tools
Conclusion
While institutional investors have favored BTC for most of this cycle, investors are gradually turning to selected altcoins like ETH and SOL, which seem relatively undervalued. Benefiting from the passage of the GENIUS Act in Congress, ETH is increasingly seen as a representative of the thriving real-world assets theme. Nonetheless, ETH and SOL are supported by institutional investor interest and their beta value to the broader cryptocurrency ecosystem. Although Solana's meme coin-driven activity has slowed, it is demonstrating its capacity for high transaction volumes and exploring new domains. In the short term, technical factors may dominate price trends, including capital flows, market sentiment, and other indicators.
Disclaimer
The content of this article does not represent the views of ChainCatcher. The opinions, data, and conclusions in the text represent the personal positions of the original author or interviewee. The translation team maintains a neutral attitude and does not endorse its accuracy. It does not constitute any professional advice or guidance. Readers should use it cautiously based on independent judgment. This translation is solely for knowledge sharing purposes. Readers are requested to strictly comply with local laws and regulations and not participate in any illegal financial activities.
