Bitcoin’s 44% Outperformance of Ethereum Post-Merge: Key Factors Revealed
The digital currency market has faced significant downward pressure recently, with major assets like Bitcoin (BTC) and Ethereum (ETH) encountering challenges in gaining positive momentum. Both Bitcoin and Ethereum experienced substantial losses over the past week, contributing to a lackluster performance in the crypto space.
Despite a slowdown in BTC price growth during the last two quarters of 2024, Bitcoin continues to outperform Ethereum in terms of market dynamics. While part of this difference can be attributed to Ethereum’s lackluster performance in recent times, insights from a blockchain analytics company shed light on the relationship between Bitcoin and Ethereum.
According to a recent report by CryptoQuant, Ethereum has lagged behind Bitcoin by 44% since The Merge event in 2022, which marked Ethereum’s transition from a Proof-of-Work to a Proof-of-Stake network. Presently, data from TradingView indicates that the ETH/BTC price hovers around $0.04122, marking its lowest level since April 2021. Despite the introduction of spot Ethereum exchange-traded funds in the U.S., the ETH/BTC pair has declined by 18% post-approval.
CryptoQuant suggests that Ethereum’s sluggish performance against Bitcoin stems from its comparatively weaker network activity. For instance, Ethereum’s total transaction fees have been decreasing steadily following the Dencun upgrade, with transaction counts hitting a multi-year low. Additionally, Ethereum’s supply dynamics have been less favorable compared to Bitcoin, with the total Ether supply steadily increasing since the Dencun upgrade.
Investor preference for Bitcoin over Ethereum is evident in the declining relative spot trading volume of ETH to BTC, dropping from 1.6 to 0.76 in the past week. Looking ahead, CryptoQuant anticipates that Ethereum may continue to underperform against Bitcoin, given its current valuation. The analytics firm suggests that ETH/BTC would need to drop by at least 50% to enter the undervaluation zone. Presently, Bitcoin is priced around $53,700, while Ethereum is valued at $2,213 according to CoinGecko data.
In conclusion, the cryptocurrency landscape reflects Bitcoin’s dominance over Ethereum in recent market movements. Despite Ethereum’s efforts to gain traction, factors like network activity, supply dynamics, and investor sentiment continue to favor Bitcoin over its counterpart. As the digital currency market evolves, monitoring the performance of key assets like Bitcoin and Ethereum remains crucial for investors and enthusiasts alike.
