As of the latest market data, Ethereum (ETH) remains firm but continues to underperform against Bitcoin (BTC). Although ETH is floating above the $2,400 mark and may potentially break above $3,000 in the coming years, the rapid strengthening of Bitcoin, the world’s most valuable cryptocurrency, might push the ETH/BTC ratio to multi-month lows.
ETH Struggling Versus Bitcoin, ETH/BTC Ratio Drops To A 40-Month Low
According to data from IntoTheBlock, as of September 20, Ethereum is trading at its lowest level versus Bitcoin in over 40 months. This trend underscores the market’s bullish sentiment towards Bitcoin, even with increased institutional engagement.
Interestingly, ETH continues to underperform despite the approval of spot Ethereum ETFs for trading in July 2024. The approval of these complex derivatives has allowed institutions to gain exposure to the second most valuable cryptocurrency within regulatory frameworks, without incurring the high costs previously associated with Grayscale ETHE shares. However, the fees were higher when the regulatory status of ETH was uncertain.
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Although the United States Securities and Exchange Commission (SEC) has not officially endorsed ETH as a commodity like Bitcoin, the Commodity Futures Trading Commission (CFTC) has repeatedly classified ETH as a commodity. This regulatory clarity has not significantly impacted ETH’s performance against BTC.
With ETH’s continuous slide against BTC, analysts at IntoTheBlock are convinced that institutional investors are more confident in Bitcoin’s prospects. They attribute this to Bitcoin’s relative stability compared to Ethereum, which has a higher risk-reward profile.
Will Ethereum Find Support?
Despite this analysis, it’s essential to note that Bitcoin primarily serves as a transactional layer, benefiting from its first-mover advantage. In contrast, Ethereum, as the first smart contracts platform, hosts various innovations, including decentralized finance (DeFi), non-fungible tokens (NFTs), and tokenization.
Larry Fink, CEO of BlackRock, has previously mentioned that real-world asset (RWA) tokenization, predominantly conducted on Ethereum, will likely rise to command a trillion-dollar market cap. BlackRock has even issued BUIDL, a product tokenizing United States Treasuries, on the Ethereum network.
Whether ETH will recover against BTC remains to be seen. Analyzing the daily chart, the trend appears to be shifting, at least in the short term. The double-bar bullish formation observed on September 18 and 19 has been confirmed, indicating a potential bullish reversal.
Additionally, ETH seems to be gaining momentum, turning the corner from the 61.8% Fibonacci retracement level of the 2020 to 2021 trade range. This suggests that Ethereum might find support and potentially strengthen against Bitcoin in the near future.
