The cryptocurrency market has been under intense bearish pressure in recent weeks, with several large-cap assets including Bitcoin (BTC) and Ethereum (ETH) struggling to place in a positive shift. The past week was particularly drab for the 2 largest cryptocurrencies, as they posted double-digit losses within the last seven-day period.
While the BTC price performance has cooled off previously two quarters of 2024, the flagship cryptocurrency remains to be outpacing Ethereum when it comes to market motion. Although a few of this could be attributed to ETH’s own underwhelming performance in recent weeks, a blockchain analytics company has offered insight into the dynamics between Bitcoin and Ethereum.
Here’s Why Bitcoin Is Outperforming Ethereum: CryptoQuant
In its latest report, CryptoQuant discussed the performance of Ethereum relative to Bitcoin in recent times. In accordance with the platform’s data, Ethereum has underperformed Bitcoin by 44% since The Merge, an event in 2022 that saw Ethereum (formerly a Proof-of-Work blockchain) transition right into a Proof-of-Stake (PoS) network.
As of this writing, data from TradingView shows that the ETH/BTC price stands at around $0.04122, the bottom level since April 2021. ETH’s underwhelming motion against BTC has continued despite the recent launch of spot Ethereum exchange-traded funds (ETFs) in the US. In actual fact, the ETH/BTC pair is down by 18% because the approval of the funds.
Source: CryptoQuant
In accordance with CryptoQuant, Ethereum’s sluggish motion against Bitcoin could be related to its relatively weaker network activity. As an example, Ethereum’s network total transaction fees have been on a sustained decline following the Dencun upgrade. Meanwhile, the relative transaction count has fallen to a multi-year low of 11.
Moreover, the provision dynamics haven’t been particularly favorable to Ethereum in comparison with Bitcoin. CryptoQuant highlighted that the entire Ether supply has been growing consistently since early April, shortly after the Dencun upgrade. Coincidentally, Bitcoin accomplished its fourth halving event in April, seeing miners’ rewards slashed from 12.5 BTC to six.25 BTC.
Furthermore, investors have shown a preference for Bitcoin over Ethereum. This fact is supported by the decline within the relative spot trading volume of ETH to BTC, which has dipped from 1.6 (I.e., the previous’s spot trading volume was 1.6 times greater than the latter’s) to 0.76 previously week.
What Next?
Interestingly, CryptoQuant believes that Ethereum could proceed to underperform against Bitcoin, especially because it remains to be above undervaluation territory. In accordance with the analytics firm, ETH/BTC would wish to fall at the very least 50% from its current level to achieve the undervaluation zone. As of this writing, the Bitcoin price stands around $53,700 while Ethereum is valued at $2,213, in accordance with CoinGecko data.
ETH struggles against BTC on the each day timeframe | Source: ETHBTC chart from TradingView
Featured image from iStock, chart from TradingView