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Ethereum, the world’s largest altcoin, has received strong scrutiny by an analyst on X who posits that ETH is in a "death spiral." In his analysis, Fred Krueger examined the amount generated in fee revenue by Ethereum and compared how the network fares compared to Bitcoin.

Krueger: "Ethereum’s feeodel is broken"

Krueger’s analysis flowed from a news item posted by community members highlighting Ethereum’s dwindling daily revenue. According to the update, so far in 2024, ETH’s daily revenue has plummeted by over 90% year-to-date (YTD), a record low for the altcoin.

Notably, Krueger believes that Ethereum’s fee model cannot support the network’s current valuation and remains very weak. According to him, the current daily $200,000 fee revenue only amounts to about $73 million in one year. Krueger emphasized that this does not translate to either profit or revenue for Ethereum but just total transaction fees in the ecosystem.

Krueger maintains that this fee is insufficient to compensate for the inflation cost that comes from ETH validators and cannot, therefore, account for Ethereum's $300 billion market cap. 

"You can see that this 'fee income' model will never, ever, ever come close to justifying this number. A number closer to $3 Billion might be more appropriate. And you could even argue that that is generous," he stated.

Is Ethereum fee decline a sign of growth?

In a striking comparison, Krueger noted that Bitcoin derives its value from being a digital currency, and like gold, it is backed by "hard proof of work." He suggests that buying Bitcoin and selling Ethereum might result in an investor’s fulfillment.

However, Ryan Watkins, cofounder of SyncracyCapital, disagrees with Krueger’s submission. Watkins argues that Ethereum will reach a new high in its on-chain activity, while fees have dropped by about 90%, indicating a bullish sign. 

"The faster fees per transaction trend towards zero the better," he insisted.

Watkins emphasized that fee reduction will facilitate the onboarding of billions into the crypto space through Ethereum, which guarantees its growth and utility. At the time of writing, data shows ETH trading at $2,491.97, which represents a 0.86% drop in price.