Challenges Ethereum Faces in Closing the Gap with Bitcoin

Ethereum (ETH) has been facing a tough time in keeping up with Bitcoin (BTC) after reaching its peak in March this year. Despite briefly hitting $4,000 following the partial approval of U.S spot ETH ETFs, ETH has consistently lagged behind BTC.

The approval of July’s final ETH ETF did not provide the anticipated boost to the altcoin’s performance. In fact, the ETHBTC ratio, which measures ETH’s value in relation to BTC, recently hit a low of 0.040 for the year.

According to analysts at Coinbase, ETH’s lackluster performance can be attributed to a divergence in net buyer interest, influenced by ETF flows and various other factors. The report highlighted that ETH ETFs experienced nine consecutive days of outflows totaling $115 million between August 15 and 27, while BTC ETFs saw inflows on eight of those nine days amounting to $427 million.

The cumulative net outflows for ETH ETFs since their inception stand at $477 million, in stark contrast to the $17.8 billion in inflows that BTC ETFs have garnered since their launch. This disparity in interest was evident even during the initial month of trading, with BTC ETFs witnessing significant demand compared to the tepid interest in ETH ETFs.

The timing of the ETF launches may have also played a role in the discrepancy, as BTC ETFs debuted in a period of high liquidity in January, whereas ETH ETFs entered the market in July amid a summer liquidity crunch when many market participants were on vacation.

Furthermore, the absence of a staking feature on U.S spot ETH ETFs and competition from alternative smart contract platforms like Solana (SOL) have potentially hindered ETH’s performance. The lack of a cohesive narrative and direction for the Ethereum ecosystem, coupled with recent criticism of Ethereum founder Vitalik Buterin, who expressed skepticism about the growth potential of “pure DeFi,” may have further dampened investor interest in the altcoin.

The divergent views within the Ethereum community and the absence of a clear vision could make it challenging for investors to grasp ETH’s narrative and value proposition. As of the latest update, BTC was trading at $58.9k, down about 20% from its March peak, while ETH was valued at $2.5k, reflecting a 38% decline from its high earlier in the year.