The cryptocurrency market has been under intense downward pressure in recent weeks, with many large-cap assets including Bitcoin (BTC) and Ethereum (ETH) struggling to make a positive turnaround. Last week was particularly bleak for the two largest cryptocurrencies, with both posting double-digit losses in the last seven days.
While Bitcoin’s price performance has slowed over the past two quarters of 2024, the leading cryptocurrency still outperforms Ethereum in terms of market movement. While some of this can be attributed to Ethereum’s disappointing performance in recent weeks, blockchain analytics firm Investopedia has provided insight into the dynamics between Bitcoin and Ethereum.
Here’s Why Bitcoin Is Outperforming Ethereum: CryptoQuant
In its latest report, CryptoQuant stated: discussion Ethereum’s performance compared to Bitcoin in recent years. According to the platform’s data, Ethereum has underperformed Bitcoin by 44% since The Merge, an event in 2022 that saw Ethereum (previously a proof-of-work blockchain) transition to a proof-of-stake (PoS) network.
As of this writing, Data from TradingView The chart shows that the ETH/BTC price is around $0.04122, the lowest level since April 2021. ETH’s disappointing move against BTC continues despite the recent launch of Ethereum exchange-traded funds (ETFs) in the United States. In fact, the ETH/BTC pair has fallen by 18% since the funds were approved.
Source: CryptoQuant
According to CryptoQuant, Ethereum’s slowdown in the face of Bitcoin can be linked to its relatively weaker network activity. For example, the Ethereum network’s overall transaction fees have been steadily declining since the Dencun upgrade. Meanwhile, the relative transaction count has fallen to a multi-year low of 11.
Furthermore, supply dynamics have not been particularly favorable for Ethereum compared to Bitcoin. CryptoQuant highlighted that Ethereum’s total supply has been steadily growing since early April, shortly after the Dencun upgrade. Coincidentally, Bitcoin completed its fourth halving event in April, where miner rewards dropped from 12.5 BTC to 6.25 BTC.
Moreover, investors have shown a preference for Bitcoin over Ethereum. This fact is supported by the decline in the relative spot trading volume of Ethereum versus Bitcoin, which fell from 1.6 (i.e. the spot trading volume of the former was about 1.6 times larger than the spot trading volume of the latter) to 0.76 in the past week.
What’s next?
Interestingly, CryptoQuant believes that Ethereum may continue to underperform against Bitcoin, especially since it is still above the low-value zone. According to the analytics firm, ETH/BTC would need to drop by at least 50% from its current level to reach the low-value zone. As of this writing, Bitcoin is trading at around $53,700 while Ethereum is trading at $2,213, according to CryptoQuant. CoinGecko Data.
ETH struggles against BTC on the daily timeframe | Source: ETHBTC chart from TradingView
Featured image by iStock, chart by TradingView
Comments are closed, but trackbacks and pingbacks are open.