Ethereum’s value against Bitcoin has hit a 4-year low, leaving many crypto enthusiasts wondering why the ETH/BTC ratio has dropped so dramatically. Currently, the ratio stands at 0.028, according to RatioGang, with a recent dip to 0.027. This decline shows how Ethereum is underperforming compared to Bitcoin in the crypto trading market.
In the last month alone, Ethereum has dropped approximately 13.8% against Bitcoin. Looking at the bigger picture, the ETH/BTC ratio has fallen more than 70% since September 2022. Despite this trend, some experts maintain a cautiously optimistic outlook for Ethereum’s long-term performance.
Let’s break down what’s causing this shift and what it means for crypto trading enthusiasts.
Institutional Investors Favor Bitcoin
One of the biggest reasons for Ethereum’s underperformance is the growing preference for Bitcoin ETFs among institutional investors. Bitcoin’s strong reputation and regulatory advancements have given it an edge. Over the past year, Bitcoin ETFs attracted $35 billion in inflows, while Ethereum’s inflows lagged at just $2.6 billion.
Sean Dawson, head of research at Derive.xyz, notes that there’s still a “mildly positive sentiment” for Ethereum in the long run, with indicators like 25 delta skews showing possible bullish trends. However, this optimism isn’t enough to offset the current demand for Bitcoin.
Ethereum’s Inflation Problem
Another major factor contributing to Ethereum’s struggles in crypto trading is its inflation rate. After Ethereum’s transition to a proof-of-stake (PoS) system in 2022, many expected it to become a deflationary asset. Instead, its supply has grown by 5.4% since February 2024, according to YCharts.
Ethereum’s current supply has returned to pre-upgrade levels, with 120.52 million tokens in circulation—up from 120.1 million. While this increase may seem small, it’s significant because Ethereum was supposed to reduce its supply after the Merge upgrade.
This unexpected inflation has weakened Ethereum’s position, allowing Bitcoin to maintain its dominance in the crypto market.
Ethereum’s Decline in Revenue and Market Participation
Ethereum’s troubles extend beyond its inflation problem. It has also slipped in terms of fee revenue, ranking sixth behind competitors like Circle’s USDC and Solana, based on data from Token Terminal.
In 2024, Bitcoin’s price soared by 121.4%, while Ethereum managed only 46.29% growth, according to CoinGecko. The lack of a strong catalyst for Ethereum’s price has widened the performance gap.
Pratik Kala, head of research at Apollo Crypto, explains that while Bitcoin benefits from big buyers like MicroStrategy, Ethereum doesn’t have the same level of demand. He also mentions that interest in Ethereum-based ETFs has been “lackluster.”
The Role of Network Upgrades
Delays in Ethereum’s Pectra upgrade have further contributed to its struggles in crypto trading. The upgrade, initially expected earlier, is now set to launch in March, according to Ethereum co-founder Vitalik Buterin. Experts believe that if successfully implemented, this upgrade could help reverse Ethereum’s downward trend.
However, network participation has already seen some setbacks. The number of active validators on Ethereum dropped by 1% last month, while competitors like Solana have gained market share. Solana now holds over 50% of decentralized exchange (DEX) trading volume, though much of it is linked to specific pump-and-dump activities, according to an OKX report.
Internal Challenges for Ethereum
Ethereum’s internal challenges have added another layer of complexity. Earlier this year, a mistranslated interview with Ethereum Foundation (EF) executive director Aya Miyaguchi sparked controversy, prompting Vitalik Buterin to address the growing tension within the community.
At the same time, the Etherealize project was launched to attract Wall Street investors to Ethereum. While this initiative has potential, experts believe that Ethereum needs stronger leadership and clearer direction to regain investor confidence.
Le Shi, managing director at Auros, points out that Ethereum has seen growing institutional adoption through projects like Blackrock’s BUIDL fund, but it hasn’t translated into significant price gains. Compared to Bitcoin’s simple narrative and growing institutional backing, Ethereum’s broader ambitions face an uphill battle.
What the Future Holds for Ethereum
Despite its current challenges, Ethereum isn’t out of the game yet. The upcoming Pectra upgrade and other developments could help it bounce back. Additionally, some analysts believe that Ethereum’s long-term outlook remains positive, especially as more decentralized finance (DeFi) projects and NFTs continue to rely on its network.
For now, Bitcoin’s dominance in crypto trading seems unshakable. Its strong brand recognition, simpler use case, and growing acceptance among institutional investors make it the preferred choice for many.
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