Bitcoin’s 44% Superior Performance Over Ethereum Post-Merge: Key Factors Revealed

The digital currency market has faced significant downward pressure in recent weeks, with major assets such as Bitcoin (BTC) and Ethereum (ETH) struggling to show positive momentum. The previous week was particularly lackluster for these two leading cryptocurrencies, as they recorded substantial losses over the seven-day period.

Despite a cooling performance in the first two quarters of 2024, Bitcoin continues to outpace Ethereum in terms of market activity. While some of this difference can be attributed to Ethereum’s recent lackluster performance, a blockchain analytics company has shed light on the relationship between Bitcoin and Ethereum.

In its recent report, CryptoQuant discussed Ethereum’s performance relative to Bitcoin in recent years. According to the platform’s data, 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.

Current data from TradingView indicates that the ETH/BTC price is approximately $0.04122, the lowest level since April 2021. Despite the recent introduction of spot Ethereum exchange-traded funds (ETFs) in the United States, Ethereum’s performance against Bitcoin has been lackluster, with the ETH/BTC pair declining by 18% since the ETF approval.

CryptoQuant suggests that Ethereum’s sluggish performance against Bitcoin can be linked to its weaker network activity. For example, Ethereum’s total transaction fees have been consistently decreasing following the Dencun upgrade, while the transaction count has dropped to a multi-year low of 11.

Additionally, supply dynamics have not favored Ethereum compared to Bitcoin. CryptoQuant noted that the total Ether supply has been steadily increasing since early April, coinciding with the Dencun upgrade, while Bitcoin underwent its fourth halving event in April, reducing miners’ rewards.

Investors have shown a preference for Bitcoin over Ethereum, as evidenced by the decline in the relative spot trading volume of ETH to BTC, dropping from 1.6 to 0.76 in the past week.

CryptoQuant anticipates that Ethereum may continue to underperform against Bitcoin, especially as it remains above undervaluation levels. According to the analytics firm, ETH/BTC would need to drop by at least 50% from its current level to reach undervaluation territory. Presently, Bitcoin is priced around $53,700, while Ethereum is valued at $2,213, according to CoinGecko data.

The ongoing struggle between Ethereum and Bitcoin on the daily timeframe highlights the challenges faced by Ethereum in gaining ground against its counterpart in the digital currency market.