Bitcoin has seen substantial gains this year, Ethereum has struggled, falling to a 40-month low in its ETH/BTC trading pair. Here’s a closer look at the factors contributing to Ethereum’s lag behind Bitcoin:
One of the key factors influencing Ethereum’s struggle against Bitcoin is the relative underperformance of Ethereum-based Exchange-Traded Funds (ETFs).
Since the approval of Bitcoin ETFs by the Securities and Exchange Commission (SEC) on January 10, these investment products have seen significant success. Bitcoin ETFs have attracted substantial interest from institutional and retail investors alike. In contrast, Ethereum ETFs have not captured the same level of enthusiasm.
According to on-chain data provider Glassnode, Bitcoin ETFs have a substantial impact on Bitcoin’s price, accounting for 8% of the spot volume. In comparison, Ethereum ETFs contribute only 1% to Ether’s spot volume. This disparity suggests that the demand for Bitcoin ETFs is significantly higher than for their Ethereum counterparts. As a result, the increased appetite for Bitcoin investments has further fueled Bitcoin’s price rise while leaving Ethereum behind.
Another crucial factor is Bitcoin’s increasing market dominance. Market dominance measures Bitcoin’s market capitalization relative to the entire cryptocurrency market. As Bitcoin’s dominance rises, its strength compared to other cryptocurrencies, including Ethereum, also grows.
In 2024, Bitcoin’s market dominance has been on an upward trend, reaching a 40-month high of 58% on August 5. This rising dominance indicates that investors are favoring Bitcoin over altcoins. As Bitcoin continues to strengthen its position, Ethereum’s value against Bitcoin is expected to decline further. This shift reflects a broader investor sentiment that is more bullish on Bitcoin compared to other digital assets like Ethereum.
On-chain metrics offer valuable insights into the health and usage of a blockchain network. For Ethereum, recent on-chain data suggests a decrease in network activity, contributing to its underperformance.
The number of daily active addresses on the Ethereum network has dropped to an average of 430,250 over the past 30 days, a decrease of 7.7% compared to three months ago. This figure is significantly lower than the peak of 686,350 active addresses seen in May 2021. A decline in active addresses often indicates reduced engagement with the network and fewer transactions, which can negatively impact the price of Ether.
Furthermore, data from DAppRadar shows a 19% decline in the number of active addresses interacting with Ethereum’s decentralized applications (DApps) over the past 30 days. In contrast, competing blockchains such as Solana and Tron have experienced substantial increases in their user base, with UAWs (Unique Active Wallets) rising by 257% and 343%, respectively. This suggests that Ethereum is losing traction in the DApp space, which could be affecting its overall market performance.
Ethereum’s lag behind Bitcoin in 2024 can be attributed to several interconnected factors. The underperformance of Ethereum ETFs, rising Bitcoin market dominance, and sluggish on-chain metrics all contribute to the current scenario. As Bitcoin continues to outperform Ethereum, investors and market observers are closely watching how these dynamics will evolve in the coming months.
For Ethereum to regain momentum, it will need to see improvements in ETF performance, a reversal in market dominance trends, and increased on-chain activity. Until then, Ethereum’s price may continue to struggle compared to its top competitor, Bitcoin.
Julie is a renowned crypto journalist with a passion for uncovering the latest trends in blockchain and cryptocurrency. With over a decade of experience, she has become a trusted voice in the industry, providing insightful analysis and in-depth reporting on groundbreaking developments. Julie's work has been featured in leading publications, solidifying her reputation as a leading expert in the field.
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