Key Points
- Ethereum’s underperformance has reached a three-year low, falling behind peers like Bitcoin and Solana.
- Experts suggest that a significant reversal for Ethereum could only occur through a fundamental shift in narrative.
Despite the ongoing bull run in the market cycle, Ethereum has lagged behind its peers, including Bitcoin and Solana. The underperformance of Ethereum continued even after the US spot Ethereum ETF was approved in July.
Ethereum’s Performance
Over the weekend, the ETHBTC ratio, which measures the value of Ethereum relative to Bitcoin, fell below 0.04, hitting a yearly low last witnessed 3.5 years ago. Alex Thorn, Head of Research at Galaxy Digital, pointed out this worrying trend since the post-Merge upgrade.
Thorn questioned, “ETHBTC just traded on a 0.03 handle for the first time in 3.5 years (Apr 2021). -53% since the Merge in September 2022. What stops this train?” At the time of writing, the ETHBTC ratio had broken below its descending channel, suggesting that more investors could potentially rotate capital to Bitcoin.
Possible Future for Ethereum
Thorn suggested that Ethereum could only experience a significant reversal through a fundamental shift in narrative. He stated, “Big forces are at play here. I don’t think a technical breakout is the thing that does it here. It needs a fundamental narrative shift.”
Following the Dencun upgrade in March, Ethereum’s fees suffered a significant blow, and L1 network activity declined. Some experts attributed this to ‘parasitic and extractive L2s.’ The monthly revenue plummeted from nearly $600 million in March to $100 million in September.
During the same period, Ethereum became inflationary, with more tokens being issued than burned. This undermined its ‘ultra-sound money’ status post the Merge.
David Doung, Global Head of Research at Coinbase, attributed Ethereum’s price underperformance to the current market structure. Doung highlighted the weak seasonals in September and competition from other altcoins. He suggested that the short-term narrative could only shift if Ethereum brings more real-world assets and applications with broad public appeal into the network.
Crypto analyst Benjamin Cowen projected that the ETH/BTC ratio could bottom at 0.30 – 0.40 by December and rally in 2025. He warned that the ETH/BTC crash could derail an altcoin rally. Cowen noted, “But history shows that when ETH/BTC crashes, the ALTs will follow.” At press time, Ethereum was valued at $2.3K, down nearly 10% from its monthly high of $2.56K hit in early September.
