Ethereum (ETH) has been trailing behind Bitcoin (BTC) by as much as 44% since undergoing a transition to a proof-of-stake (PoS) network known as “Merge” nearly two years ago, as highlighted in a recent report by analysts at CryptoQuant.
The Merge upgrade was a significant milestone for Ethereum, signaling its shift from the energy-intensive proof-of-work (PoW) mechanism to PoS. However, despite this transformation, ETH’s performance has failed to keep pace with Bitcoin.
Even with the recent approval of Ethereum spot ETFs in the US on July 23, CryptoQuant data shows that ETH has continued to underperform Bitcoin. The ETH/BTC price ratio has dropped to 0.0425, reaching its lowest level since April 2021.
Not only has Ethereum struggled in comparison to Bitcoin, but it has also fallen behind other major altcoins like Solana and BNB since the Merge. According to Julio Moreno, CryptoQuant’s Head of Research, ETH has declined by 53% and 18% against Solana and BNB, respectively.
Looking ahead, CryptoQuant analysts project that ETH could further depreciate relative to Bitcoin. They estimate that ETH would need to decline by around 50% to reach 0.02 in bitcoin terms to be considered undervalued.
The underperformance of Ethereum can be attributed in part to its weaker network activity compared to Bitcoin. Transaction fees on Ethereum have been decreasing steadily, particularly after the Dencun upgrade, which aimed to enhance efficiency but resulted in lower transaction costs. Additionally, Ethereum’s transaction count relative to Bitcoin has dropped to its lowest levels since July 2020.
Another contributing factor to ETH’s lackluster performance is its unfavorable supply dynamics. The total supply of ether has been increasing since early April, currently standing at 120.323 million, the highest level since May 2023. This rise in supply has likely added downward pressure on ETH prices.
Furthermore, there has been a shift in investor sentiment favoring Bitcoin over ETH, as indicated by a significant decrease in spot trading volume for ETH compared to BTC. The ETH/BTC spot trading volume ratio has plummeted from 1.6 to 0.76 in just the past week, reflecting a growing preference for Bitcoin among traders.
It is important to note that this information is provided for educational purposes and should not be considered as investment advice.
