Ether (ETH) had been experiencing a strong rally since the start of the year, but its momentum began to wane in mid-March. Despite gaining about 48% in its USD pair year-to-date, ETH has been trailing behind Bitcoin (BTC), which has gained approximately 57% over the same period.
There are three main factors contributing to ETH’s underperformance compared to BTC in recent days. Firstly, there has been a decline in network activity. Additionally, sentiment surrounding the potential approval of spot Ethereum ETFs in May has been negative.
Over the past 30 days, Ether has seen a decline of 13.5% against Bitcoin and other top layer 1 tokens. In contrast, BTC’s price has only dropped by 4% during the same period, while tokens like BNB and SOL have experienced significant rallies of 15.5% and 16% respectively.
The ETH/BTC ratio has been on a downward trend since March 8, reaching its lowest point of $0.047 on April 7. This can be attributed to various factors, including new all-time high prices, over $10 billion invested in spot BTC ETFs, and a surge in Bitcoin Ordinals trading volume, which has reached close to $3 billion. Furthermore, the upcoming Bitcoin supply halving, which has historically preceded bull runs in the crypto market, has contributed to BTC’s performance.
To understand why Ether continues to underperform BTC, it’s important to examine Ethereum’s network activity and scaling solutions. The decrease in the number of active addresses and transaction volume in the top Ethereum decentralized applications (DApps) indicates a decline in demand for ETH.
Data from DappRadar shows that Ethereum DApps have experienced a 6.42% decrease in active addresses over the past 30 days. Transaction volume in popular DApps like Uniswap, MetaMask Swap, Blur, and OpenSea has also declined by 26.51% during the same period. Additionally, data from CoinGlass reveals a drop in Ethereum’s network activity, specifically in daily active addresses.
While Ethereum remains a dominant force in the DeFi sector, Solana has been gaining market share in terms of on-chain activity, driven by the memecoin frenzy and stablecoin transfers.
Adding to Ether’s bearish momentum is the decreasing likelihood of an Ethereum ETF being approved by May. VanEck CEO Jan van Eck expressed skepticism about the approval of spot Ether ETFs by the U.S. Securities and Exchange Commission (SEC). He believes that VanEck’s Ethereum ETF application will “probably be rejected.” Meanwhile, Bloomberg ETF analyst Eric Blachunas, who previously gave a 70% chance of an Ethereum ETF approval by May, has now reduced the odds to 35% due to the lack of communication from the SEC.
In conclusion, Ether’s underperformance compared to Bitcoin can be attributed to various factors such as declining network activity, negative sentiment surrounding ETF approvals, and the rise of competing tokens. Investors should conduct their own research and exercise caution when making investment decisions.