Ethereum’s Continuing Decline Against Bitcoin
Ethereum (ETH), the second-largest digital asset by market capitalization, has been underperforming against Bitcoin (BTC). Recently, ETH hit new multi-year lows when compared to BTC, which has raised concerns among Ethereum enthusiasts and investors. As of now, Ethereum’s native token, ETH, slipped further against Bitcoin, marking a low of 0.0365. This downward trend has effectively wiped out all gains ETH had made against Bitcoin since April 2021.
A Historical Perspective
In December 2021, Ethereum reached a local high of 0.0865 against Bitcoin. However, this high was short-lived as ETH has followed a prolonged downward trajectory against the leading digital currency, declining by nearly 58%. Notably, the last time ETH posted a positive monthly candle against BTC was in May 2024. With October nearing its end, it appears that ETH might close with five consecutive red monthly candles against Bitcoin.
On a year-to-date basis, ETH has declined over 30% against BTC. Interestingly, the ETH/BTC trading pair has plunged more than 22% in the past three months alone, indicating that the bulk of these losses are relatively recent. Several factors, including the rise of competing smart contract blockchains such as Solana (SOL), contribute to ETH’s lackluster performance.
The Rise of Solana and Its Impact on Ethereum
Solana (SOL) has been on an upward trajectory against Ethereum since June 2024. On a year-to-date basis, SOL has gained nearly 60% against ETH. As of the latest data, the SOL/ETH ratio is approaching a new all-time high, trading close to 0.069.
Factors Contributing to Ethereum’s Underperformance
Despite Ethereum’s growing adoption, evidenced by the recent approval of an Ethereum exchange-traded fund (ETF) by the US Securities and Exchange Commission (SEC), these developments have not translated into positive price movement for ETH. A recent analysis revealed that more than 34 million ETH, approximately 30% of its total supply, is currently staked. This reduced circulating supply due to staking has not been enough to bolster ETH’s price performance against other digital assets.
The Role of Layer-2 Solutions
The remarkable growth of Ethereum layer-2 (L2) solutions, such as Optimism, Arbitrum, and Base, has diverted attention away from Ethereum’s primary blockchain, further impacting its price dynamics. Cyber Capital’s founder, Justin Bons, commented in August that “Ethereum is dying while L2’s dance on its grave,” highlighting the growing reliance on these solutions.
Market Sentiment and Future Outlook
Despite the prevailing pessimism surrounding Ethereum’s price action, ETH whales appear undeterred. They continue to accumulate more tokens, betting on Ethereum’s potential for future price appreciation. Recent studies have shown that Ethereum whales now control about 43% of the entire ETH supply. Additionally, asset management giant BlackRock has reportedly sold BTC holdings in favor of ETH, indicating a bullish stance towards Ethereum.
As of the latest update, ETH is trading at $2,532, reflecting a modest 0.2% increase over the past 24 hours.
