- Bitget’s chief analyst has recently highlighted the current discrepancy in capital movements between Bitcoin and Ethereum.
- While ETH usually follows BTC’s trends, various factors prevent it from surpassing BTC in performance.
Bitcoin (BTC) and Ethereum (ETH) prices generally follow similar trends influenced by macroeconomic conditions and significant events within the crypto sector. As reported on Friday, Macroaxis showed their three-month correlation score was at 0.69. The proximity of the correlation coefficient to +1 suggests limited diversification between these two assets.
Nonetheless, according to Ryan Lee, Chief Analyst at Bitget Research, their capital flows tell a different story. Recently, the analyst from one of the top global crypto exchanges, which celebrated its sixth anniversary this week, shared insights regarding this trend.
Bitcoin as “Digital Gold” and Defensive Asset
Lee asserts that Bitcoin has solidified its status as a digital refuge amid economic instability. The rise in its price this week, despite mixed reactions to the US Federal Reserve’s recent 50-basis point interest rate cut, reinforces its reputation as “digital gold”.
The Bitget analyst noted that Bitcoin acts as a protective asset in investors’ portfolios, particularly during times of market disturbance. Conversely, while Ethereum has attracted considerable institutional interest, it is still predominantly perceived as a risk asset. This is evident in the consistently higher transaction volumes of BTC compared to ETH, especially within the US spot crypto ETF space.
Lee pointed out that the cautious sentiment toward Ethereum stems from its significant dependence on decentralized finance (DeFi) and non-fungible tokens (NFTs), making it more susceptible to shifts in risk appetite.
Pressure on Ethereum’s Technology and On-Chain Activity
Lee further emphasized that Ether has encountered challenges in its technological advancement, especially concerning the promotion of Layer 2 (L2) scaling solutions. He believes that its lackluster performance and insufficient innovation are critical factors leading to the outflow of funds from its ecosystem.
This trend starkly contrasts Solana’s (SOL) ongoing efforts to enhance both its offerings and services. Recently, the SOL community embraced the launch of a Web3-oriented phone, the Solana Seeker.
Notably, Vitalik Buterin, Ethereum’s co-founder, has voiced criticism regarding the current state of Ethereum. He raised concerns about the increasing dominance of centralized entities within the blockchain ecosystem during Ethereum Singapore 2024, echoing similar worries voiced by JP Morgan last year.
In response to these challenges, Buterin has advocated for reforms aimed at improving entry points and rewards for individual staking in Ethereum. He believes that enhancing accessibility and incentives would reduce the reliance of solo stakers on institutional players.
Market Expectations on Bitcoin and Ethereum
With the US Fed indicating potential further interest rate cuts in its latest statement, the Bitget Research analyst anticipates increased liquidity favoring Bitcoin. While Ethereum and other altcoins may also benefit from the positive market sentiment generated by BTC to some extent, the identified limitations will continue to pose challenges for its price increase and capital inflow.
