This year, Bitcoin has achieved significant gains, while Ethereum has faced challenges, sinking to a 40-month low in its ETH/BTC trading pair. Let’s delve into the reasons why Ethereum is lagging behind Bitcoin:
Challenges with Ethereum ETFs
A major reason for Ethereum’s difficulties against Bitcoin is the underwhelming performance of Ethereum-based Exchange-Traded Funds (ETFs).
Since the Securities and Exchange Commission (SEC) approved Bitcoin ETFs on January 10, these products have experienced notable success, drawing considerable interest from both institutional and retail investors. Conversely, Ethereum ETFs have not attracted similar excitement.
On-chain data from Glassnode reveals that Bitcoin ETFs significantly influence Bitcoin’s price, constituting 8% of its spot volume. In stark contrast, Ethereum ETFs only account for 1% of Ether’s spot volume. This difference indicates a far greater demand for Bitcoin ETFs compared to their Ethereum equivalents. Consequently, the rising interest in Bitcoin investments has propelled its price upward while leaving Ethereum trailing.
Increased Bitcoin Market Dominance
Another vital element is Bitcoin’s growing market dominance. This metric measures Bitcoin’s market capitalization in relation to the entire cryptocurrency market. As Bitcoin’s dominance expands, its standing relative to other cryptocurrencies, including Ethereum, strengthens.
In 2024, Bitcoin’s market dominance has experienced an upward trajectory, peaking at 58% on August 5, a level not seen in 40 months. This growing dominance indicates a preference among investors for Bitcoin over altcoins. As Bitcoin solidifies its position, Ethereum is likely to see its value against Bitcoin decline even further. This trend mirrors a broader investor mentality that is more optimistic about Bitcoin compared to other digital currencies like Ethereum.
Declining Ethereum On-Chain Metrics
On-chain metrics present essential insights into the performance and utilization of a blockchain network. For Ethereum, recent on-chain indicators reflect a downturn in network activity, which contributes to its underperformance.
The average number of daily active addresses on the Ethereum network has fallen to around 430,250 in the last 30 days, marking a 7.7% decrease from three months prior. This is significantly lower than the peak of 686,350 active addresses recorded in May 2021. A fall in active addresses often signals a drop in network engagement and fewer transactions, negatively affecting Ether’s price.
Moreover, data from DAppRadar indicates a 19% decline in active addresses engaging with Ethereum’s decentralized applications (DApps) over the past month. In comparison, rival blockchains like Solana and Tron have seen substantial growth in their user numbers, with Unique Active Wallets (UAWs) increasing by 257% and 343%, respectively. This trend suggests that Ethereum is losing ground in the DApp sector, which may impact its overall market performance.
Conclusion
Ethereum’s underachievement relative to Bitcoin in 2024 is due to several interconnected factors. The lackluster performance of Ethereum ETFs, the rise of Bitcoin’s market dominance, and stagnant on-chain metrics all play a role in the current situation. As Bitcoin continues to outshine Ethereum, investors and market analysts are observing how these trends will unfold in the months ahead.
For Ethereum to regain its lost momentum, it will need to enhance ETF performance, reverse market dominance trends, and stimulate on-chain activity. Until such changes occur, Ethereum’s price may continue to struggle against its leading rival, Bitcoin.
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