Bitcoin and Ethereum Are Competing to Capture Liquidity from Solana as the Latter’s Blockchain Introduces New Layer 2 Solutions

This week, Ethereum reached a 12-day high, while Solana experienced a significant liquidity drop of $772 million.

Bitcoin and Ethereum are vying for liquidity as Solana integrates new Layer 2 solutions. While Ethereum reached a 12-day high this week, Solana experienced a substantial liquidity loss of $772 million.

Prominent rug pulls and controversies involving the LIBRA and MELANIA tokens have hindered the recent surge in meme coins, further complicating Solana's situation. At press time, Solana (SOL) trades at $172.98, down over 40% from its peak of $295.83.

Coinciding with Solana's liquidity loss, Ethereum's price surged to a 12-day high of $2,849.50 this week. Both platforms have been closely matched in decentralised exchange (DEX) metrics since the launch of Pump.fun, a meme coin launchpad on Solana. However, the recent controversies surrounding meme tokens have negatively impacted market capitalisation on the Solana blockchain.

After months of underperformance relative to Ethereum, there are signs that Ethereum may be poised for a rally, as indicated by derivatives market data. The long/short ratio across derivatives exchanges has surpassed 1, suggesting bullish sentiment among traders for Ether on Binance and OKX markets.

While Bitcoin exchange-traded funds (ETFs) continue to dominate the market, Ethereum ETFs have also seen a rise in institutional adoption. According to “The Institutional Crypto Newsletter” by Coin Stack, institutional ownership of Ether has increased quarter-on-quarter, with overall Ether ETF ownership climbing from 4.8% to 14.5%. Recent 13F filings reveal a growing demand for Ethereum ETFs from institutional investors.

As Layer 2 protocols are introduced on Bitcoin, the cryptocurrency is entering the competition for DeFi liquidity that has long been associated with Ethereum. This comes as institutional interest in Bitcoin remains strong, while Ethereum may face challenges in maintaining its dominance in the DeFi market.

With the introduction of Layer 2 solutions aiming to enhance transaction speeds on the Ethereum blockchain, a similar ecosystem may emerge on Bitcoin. As more dApps and DeFi protocols integrate with Bitcoin, it could become a major player in the DeFi space.

Dom Harz, co-founder of BOB (“Build on Bitcoin”), had this to say about the recent developments in the meme coin market:

“The broad appeal of meme coins is undeniable, but following high-profile incidents, the frenzy may be cooling. The recent rug-pull accusations surrounding the $LIBRA token and other controversies may have significantly impacted the memecoin bull run.”

And on the shifting landscape in crypto:

“Despite Ethereum's underwhelming performance in this cycle, it remains the preferred chain for builders, as opportunities attract both developers and investors. With the upcoming Pectra upgrade, there is potential for a renewed focus on Ethereum as the memecoin era winds down.”

“The most exciting developments are currently occurring on Bitcoin, with innovations like BitVM and Bitcoin DeFi gaining momentum in 2025. The notion that investors must look beyond Bitcoin for DeFi opportunities is rapidly changing as more builders and institutions turn their attention to crypto’s most secure asset.”

Harz also added that as the meme coin trend subsides, there could be a shift back to Bitcoin, which is attracting builders and institutions with its secure asset and DeFi capabilities.