The Ethereum-to-Bitcoin ratio has fallen to its lowest level in over four years, signaling growing institutional preference for Bitcoin and raising concerns over Ethereum’s market position.
Ethereum’s Market Position Weakens
According to data from RatioGang, the ETH/BTC ratio currently stands at 0.028, after hitting a low of 0.027 in the past 24 hours. Ethereum has declined roughly 13.8% against Bitcoin over the past month, and the ratio has dropped by more than 70% since September 2022.
Despite this downturn, some analysts remain cautiously optimistic. Sean Dawson, head of research at Derive.xyz, told Decrypt that “a mildly positive sentiment” for ETH remains in the medium to long term. He cited 25 delta skews—a measure of bullish sentiment—hovering at +8.6% and +9.4%, indicating that calls are more expensive than puts, potentially signaling an improved outlook heading into Q3 and beyond.
Inflation Concerns and Market Underperformance
On-chain data suggests Ethereum’s struggles are partially driven by a return to inflationary supply growth. CryptoQuant analysts highlighted that Ethereum’s supply has grown at an average rate of 5.4% since February 2024, rising from 120.1 million tokens to 120.52 million, according to YCharts.
“While this may not seem like a significant increase, it contradicts the original expectation that Ethereum would remain deflationary post-Merge,” CryptoQuant analysts noted. The supply has now returned to pre-Merge levels, raising concerns about Ethereum’s long-term tokenomics.
Beyond supply-side issues, Ethereum is also lagging behind in network revenue. Data from Token Terminal shows Ethereum now ranks sixth in blockchain fee revenue, trailing not just Bitcoin but also Circle’s USDC and Solana.
Institutional Flows Favor Bitcoin
Ethereum’s underperformance is stark when compared to Bitcoin’s recent gains. While Bitcoin surged 121.4% in 2023, Ethereum returned just 46.29%, per CoinGecko data.
One of the key drivers behind Bitcoin’s outperformance is the success of spot Bitcoin ETFs, which have attracted $35 billion in inflows since their launch. Ethereum, by contrast, has drawn just $2.6 billion, underscoring the lackluster institutional demand.
“Ethereum has not caught a bid due to a lack of strong catalysts to support price relative to Bitcoin,” said Pratik Kala, head of research at Apollo Crypto. While Bitcoin has seen large institutional buyers, including MicroStrategy, Ethereum lacks similar demand, with ETF appetite remaining weak.
Ecosystem Challenges and Internal Frictions
The Ethereum ecosystem is also facing internal struggles, with participation metrics showing concerning trends. Active validator counts fell by 1% last month, and delays in the Pectra upgrade—expected to launch by March—have allowed competitors like Solana to capture more than 50% of decentralized exchange (DEX) trading volume.
Ethereum’s challenges extend beyond technical development. Internal tensions surfaced earlier this year when Ethereum Foundation executive director Aya Miyaguchi faced backlash over a mistranslated Japanese interview. Ethereum co-founder Vitalik Buterin weighed in, acknowledging governance concerns and hinting at potential reforms to establish a more structured leadership framework.
In an effort to bolster institutional engagement, Ethereum-backed startup Etherealize, founded by former Nomura and UBS bond trader Vivek Raman, recently launched. Positioned as an “institutional marketing and product arm” for Ethereum, Etherealize aims to attract Wall Street investors, a move seen as a bid to counter Bitcoin’s dominance among institutional players.
The Road Ahead
For now, Ethereum continues to face significant headwinds, both in market performance and ecosystem development. While upcoming upgrades like Pectra could offer a turning point, Bitcoin’s simpler narrative and stronger institutional adoption have created formidable challenges for Ethereum’s broader ambitions. Whether Ethereum can reclaim lost ground in 2024 remains an open question, but for now, Bitcoin continues to lead the charge in the crypto market’s next phase.
1 Trackback / Pingback