The cryptocurrency market has been under intense bearish pressure recently, with several large-cap assets, including Bitcoin (BTC) and Ethereum (ETH), struggling to maintain positive momentum. The past week has been particularly challenging for these two leading cryptocurrencies, as they posted double-digit losses over the last seven days.
Despite the cooling off of BTC’s price performance in the past two quarters of 2024, Bitcoin continues to outperform Ethereum in market action. While Ethereum’s own underwhelming performance contributes to this disparity, insights from a blockchain analytics company shed light on the dynamics between Bitcoin and Ethereum.
Understanding Bitcoin’s Outperformance Over Ethereum: Insights from CryptoQuant
In its latest report, CryptoQuant delved into Ethereum’s performance relative to Bitcoin over recent years. According to the platform’s data, Ethereum has underperformed Bitcoin by 44% since The Merge, a significant event in 2022 that transitioned Ethereum from a Proof-of-Work (PoW) blockchain to a Proof-of-Stake (PoS) network.
As of now, data from TradingView indicates that the ETH/BTC price stands around $0.04122, marking the lowest level since April 2021. ETH’s lackluster performance against BTC has continued despite the recent launch of spot Ethereum exchange-traded funds (ETFs) in the United States. In fact, the ETH/BTC pair has declined by 18% since the approval of these funds.
According to CryptoQuant, Ethereum’s sluggish performance compared to Bitcoin is linked to its relatively weaker network activity. For example, Ethereum’s total transaction fees have been on a sustained decline following the Dencun upgrade. Additionally, the relative transaction count has fallen to a multi-year low of 11.
The supply dynamics have also been less favorable for Ethereum compared to Bitcoin. CryptoQuant highlighted that the total Ether supply has been growing consistently since early April, shortly after the Dencun upgrade. Coincidentally, Bitcoin completed its fourth halving event in April, reducing miners’ rewards from 12.5 BTC to 6.25 BTC.
Moreover, investor preference has tilted towards Bitcoin over Ethereum. This is evident from the decline in the relative spot trading volume of ETH to BTC, which has dropped from 1.6 (indicating that ETH’s spot trading volume was 1.6 times greater than BTC’s) to 0.76 in the past week.
Future Outlook: What’s Next for Ethereum and Bitcoin?
Interestingly, CryptoQuant suggests that Ethereum may continue to underperform against Bitcoin, especially as it remains above the undervaluation territory. According to the analytics firm, the ETH/BTC pair would need to fall at least 50% from its current level to reach the undervaluation zone. As of this writing, Bitcoin is priced at approximately $53,700, while Ethereum is valued at $2,213, according to CoinGecko data.
In conclusion, the ongoing dynamics between Bitcoin and Ethereum highlight the complex interplay of market forces, network activity, and investor sentiment. As the cryptocurrency market evolves, staying informed and understanding these trends will be crucial for investors and enthusiasts alike.
