The value of Ethereum compared to Bitcoin has dropped to its lowest level in four years due to institutional preferences and technical challenges.
The current ratio stands at 0.028, down from a low of 0.027 in the past day, indicating that Ethereum is currently underperforming relative to Bitcoin.
In the past month, Ethereum has declined by about 13.8% against Bitcoin. Since September 2022, the gradual decline in this ratio has exceeded 70%.
Nevertheless, in the medium to long term, there can be seen a “mildly positive sentiment” towards ETH.
Dawson noted that this prediction is “a measure of bullish sentiment with 25 delta skew hovering between +8.6% and +9.4%.” “This means that calls are more expensive compared to puts, which may indicate positive sentiment for Q3 and beyond.”
According to data from Korean blockchain analytics company CryptoQuant.
CryptoQuant analysts said in late January, “Ethereum’s underperformance makes Ethereum again the driver of inflation.” The report points to the ballooning supply of cryptocurrencies.
The supply indicator shows that since February 2024, Ethereum has had an average growth rate of 5.4%, increasing from 1.201 billion tokens in circulation to 1.2052 billion. Data from Ycharts.
CryptoQuant added, “Although it doesn’t seem like there is a significant increase in supply, the deflationary sense should kick in after Ethereum’s merge upgrade.”
It is worth noting that the current Ethereum supply has returned to the level it was at after the Ethereum transition to proof-of-stake in 2022.
Falling behind
In addition to the decline in value compared to Bitcoin, Ethereum has also fallen behind in fees, now ranking sixth out of the top ten chains in terms of fees, according to data from Token Terminal.
According to Coingecko, Bitcoin surged by 121.4% last year, while Ethereum significantly underperformed, only returning 46.29%. Data.
“Ethereum lacks a strong catalyst to support Bitcoin’s price,” said Pratik Kala, Head of Research at Apollo Crypto, told Decrypt.
The performance gap has further widened with the launch of spot ETFs, as Bitcoin products attracted $35 billion in inflows compared to Ethereum’s $2.6 billion.
Kala explained that while Bitcoin has a “range of large buyers (e.g., micro-buyers),” there is no such demand for Ethereum, but he pointed out that ETF appetite for Ethereum is “dull.”
The network participation of the Ethereum ecosystem also reflects the trend.
Active validators decreased by 1% last month, and the lack of the Spectre upgrade and previous upgrades allowed competitors like Solana to capture over 50% of DEX trading volumes, although most of it “stemmed from PumpDotFun activity,” according to OKX’s data. report.
The Spectre upgrade is expected, according to Ethereum co-founder Vitalik Buterin. Kala said that if implemented, these crucial changes could “reverse the downward trend of Ethereum.”
How the game works
Internal tensions among organizations involved in Ethereum’s technical development have also exacerbated market pressures.
In early January, Aya Miyaguchi, Executive Director of the Ethereum Foundation (EF), faced criticism after an interview with a Japanese outlet where she responded to perceived toxicity, saying that she is responsible for decision-making until such reforms can make the EF a “proper board.”
In the same week, Etherealize, a project supported by the EF, was launched to attract Wall Street investors to the Ethereum ecosystem.
Kala from Apollo Crypto pointed out that these developments have led the Ethereum community to engage in some “soul-searching” and added, “There seems to be a lack of clear leadership and direction, which puts investors in a predicament.”
At least for now, the atmosphere in the crypto market has a clear sky: Bitcoin’s simpler narrative and stronger institutional adoption pose significant headwinds for Ethereum’s broader ecosystem ambitions.
