Algorithmic trading firm Two Prime has made a significant decision to formally drop its exposure to Ethereum (ETH) and focus exclusively on managing and lending against Bitcoin (BTC). CEO Alexander Blume explained that the firm believes Bitcoin is the only digital asset that meets institutional standards for liquidity, predictability, and long-term investment viability.
The move comes after more than a year of divergence in performance between BTC and ETH, during which Two Prime issued over $1.5 billion in loans backed by both assets. Despite this exposure, the firm concluded that Ethereum’s current behavior no longer aligns with risk-adjusted return expectations suitable for institutional portfolios. Blume stated that ETH now trades more like a memecoin rather than a predictable asset.
A quantitative analysis conducted by Two Prime revealed that Ethereum’s volatility and return structure have decoupled from Bitcoin since the November 2024 US election. While Bitcoin has shown classic mean-reversion characteristics, ETH has continued to trend lower with limited rebounds, displaying persistent negative momentum and asymmetry in its data compared to BTC.
Moreover, ETH’s volatility now resembles that of memecoins like Dogecoin (DOGE), with sudden multi-standard deviation moves that are inconsistent with institutional-grade assets. Two Prime also highlighted a widening gap in institutional demand, with Bitcoin ETFs managing significantly more assets than ETH ETFs, creating a reflexive environment of underperformance in ETH products leading to reduced visibility and investor allocation.
Beyond trading behavior, Two Prime raised concerns about Ethereum’s economic and technical model, noting that newer alternatives like Solana (SOL) are challenging its position as a general-purpose decentralized computing platform. The firm argued that Ethereum’s Layer-2 networks have cannibalized much of its value capture, and its governance structure is bureaucratic, ideologically rigid, and slow to adapt to market conditions.
In conclusion, Two Prime’s decision to go BTC-only reflects a broader sentiment in the industry that Ethereum’s value proposition, governance, and cultural focus are eroding. The firm sees Bitcoin as a decentralized store of value with a clear use case, while ETH is viewed as one among many speculative tech platforms lacking a durable edge. This shift underscores the challenges facing Ethereum as it navigates a rapidly evolving digital asset landscape.