As a seasoned researcher with a decade-long career in the ever-evolving world of cryptocurrencies, I find myself intrigued by the recent developments between Bitcoin (BTC) and Ethereum (ETH). The past few weeks have been particularly challenging for both these giants, but the performance gap has widened significantly in favor of BTC.
Over the past few weeks, the market for digital currencies has faced significant downward pressure, causing major assets like Bitcoin (BTC) and Ethereum (ETH) to struggle in trying to make a positive move. The previous week was particularly dull for these two leading cryptocurrencies, as they both experienced double-digit losses over the last seven days.
In the last six months of 2024, Bitcoin’s price growth has slowed compared to previous periods, but it continues to lead Ethereum in market activity. Some of this gap can be explained by Ethereum’s less impressive performance lately, but a blockchain analysis firm has shed light on the interplay between these two major cryptocurrencies.
Here’s Why Bitcoin Is Outperforming Ethereum: CryptoQuant
CryptoQuant recently examined how Ethereum has fared compared to Bitcoin over the past few years. Based on their information, since Ethereum switched to a Proof-of-Stake system in 2022 (during The Merge), it has lagged behind Bitcoin by approximately 44%.
From my perspective as an analyst, at the moment, data from TradingView indicates that the ETH/BTC exchange rate hovers around $0.04122 – a level not seen since April 2021. Despite the recent introduction of U.S.-based spot Ethereum Exchange-Traded Funds (ETFs), ETH’s performance against BTC has remained unimpressive. Interestingly, the ETH/BTC pair has witnessed a 18% decline since the approval of these funds.
Based on CryptoQuant’s analysis, Ethereum’s slow response compared to Bitcoin may be linked to its less active network. For example, since the Dencun update, Ethereum’s total transaction fees have been consistently decreasing. Moreover, the number of transactions relative to its multi-year average has dropped to a low not seen for many years, currently standing at 11.
Moreover, it’s worth noting that the supply situation has been less advantageous for Ethereum relative to Bitcoin. CryptoQuant points out that since early April, right after the Dencun update, the total Ether supply has been increasing steadily. Interestingly, Bitcoin experienced its fourth halving event in April, which reduced miner rewards from 12.5 BTC to 6.25 BTC.
Additionally, it’s worth noting that investors have been leaning more towards Bitcoin compared to Ethereum recently. This trend is evident in the decrease of Ether’s relative spot trading volume against Bitcoin, which has dropped from approximately 1.6 (meaning Ether’s spot trading volume was 1.6 times larger than Bitcoin’s) to 0.76 over the last week.
What Next?
Interestingly, CryptoQuant believes that Ethereum could continue to underperform against Bitcoin, especially as it is still above undervaluation territory. According to the analytics firm, ETH/BTC would need to fall at least 50% from its current level to reach the undervaluation zone. As of this writing, the Bitcoin price stands around $53,700 while Ethereum is valued at $2,213, according to CoinGecko data.
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2024-09-08 01:11