Ethereum Underperforms Bitcoin by 44% Since Merge

by Nicholas Edwards · 05/09/2024

Ethereum has underperformed Bitcoin by 44% since the Merge to proof-of-stake, with analysts predicting further decline due to weaker network activity and supply dynamics.

Bollywood Fever: Ethereum (ETH) has underperformed Bitcoin (BTC) by as much as 44% since its transition to a proof-of-stake (PoS) network nearly two years ago, according to CryptoQuant analysts.

The Ethereum blockchain underwent the significant upgrade, known as “The Merge,” but since then, it has lagged behind Bitcoin in market performance.

“Next week will mark two years since Ethereum switched to a proof-of-stake network, an upgrade known as The Merge. Since then, Ethereum has underperformed Bitcoin by 44%,” said CryptoQuant analysts.

Even with the approval of Ethereum spot exchange-traded funds (ETFs) in the U.S. on July 23, ETH has continued to underperform BTC. The current ETH/BTC price ratio sits at 0.0425, marking its lowest point since April 2021.

According to CryptoQuant Head of Research Julio Moreno, “Ethereum has also underperformed altcoins like Solana and BNB since the Merge, down 53% and 18% respectively.”

Analysts believe the decline could deepen, stating that ETH would need to drop another 50% to 0.02 BTC to enter undervaluation territory.

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Factors Behind Ethereum’s Underperformance

A key factor in Ethereum’s underperformance is weaker network activity compared to Bitcoin. The network’s total transaction fees have seen a significant decline, particularly after the Dencun upgrade, which introduced lower transaction fees. Additionally, Ethereum’s transaction count relative to Bitcoin’s has dropped to its lowest level since July 2020.

The analysts also pointed out unfavorable supply dynamics, noting that Ethereum’s total supply has been steadily growing since April 2023, now reaching 120.323 million ETH, its highest level since May 2023.

Traders and investors have shown a growing preference for Bitcoin over Ethereum, as seen in the relative spot trading volume. The ETH/BTC spot trading volume ratio dropped from 1.6 to 0.76 in just the past week, reflecting this shift in market sentiment.