As the main character and sidekick of the crypto world, Bitcoin and Ethereum are generally expected to move in tandem. Bitcoin has always been the alpha of the crypto pack, asserting its dominance for years, while Ethereum has largely been regarded as the main alternative to Bitcoin and the only asset with a realistic chance to one day dethrone the original crypto, following closely in its footsteps. Therefore, when different factors cause Bitcoin to rise or drop, the ETH price usually follows the same path.
However, the gap between the two continues to get bigger and bigger as Ethereum seems unable to keep up pace with the leading coin, causing the flippening dream to drift further away. It’s pretty obvious from the most recent figures that the crypto market has seen better days, given that most digital currencies have been in the red lately. Bitcoin has been on the rise lately, and so has Ethereum, but ETH is appreciating it at a lower rate. According to the latest ETH prediction, altcoin might continue to lose ground to Bitcoin and other cryptocurrencies. Therefore, those who want to know how to purchase ETH would also do well to take note of this trend.
This begs the question: why is Ethereum lagging behind the crypto leader, and will it ever be able to catch up with it? Several theories and factors might explain this weakness in Ethereum’s performance, giving us a glimpse of what to expect in the future, so let’s see where the problem might lie.
Network Developments
Some pundits suggest that the one aspect that differentiates Ethereum from the other blockchains and is often attributed with boosting the crypto’s value – namely its versatility and the relentless pursuit of improvements by rolling out constant upgrades and updates – is actually backfiring and hurting the network instead.
To be more specific, Ethereum is always either in the process of or preparing to implement upgrades aimed at solving specific issues and, therefore, making it stronger and more resilient. However, good intentions aside, having developers meddle with the network and make all sorts of tweaks and adjustments can result in uncertainty and instability. There’s no telling if the changes that developers consider necessary will bring any real benefits or not. This means Ethereum is at developers’ whim just as fiat currencies are at governments’ whim, which is kind of ironic considering that bypassing centralized control was exactly the main argument for crypto’s existence.
By contrast, Bitcoin doesn’t have this issue. The trailblazing crypto is fixed in its way, given that it’s incredibly difficult to bring any alteration to the system. Although Bitcoin has been amply criticized for not doing much in the way of improving, the fact that it remains loyal to its decentralization ethos underscores its stability and reliability – something that many investors seem to value more than innovation and transformation.
It has to be mentioned that this is a purely theoretical assumption that’s pretty difficult to demonstrate. But one can’t help but feel there’s some truth to it given that the ETH/BTC price ratio has fallen to 0.039, which points out that the Merge has failed to deliver on its promise.
For those of you who might not be aware of Ethereum’s long string of upgrades, the Merge represents the network’s biggest overhaul, completing the shift from Proof-of-Work (PoW) to Proof-of-Stake (PoS). This transition helped Ethereum slash its energy consumption and enhance its sustainability credentials, but apparently, it didn’t augment the network’s performance or boost ETH’s value like so many expected, as figures from the past couple of years show.
Since the merge took place in September 2022, Ethereum has started on a downward trend, underperforming not only Bitcoin but also BNB and Solana. The approval of spot Ether ETFs by the Securities and Exchange Commission (SEC) in July this year didn’t do much to salvage the situation either, leaving Ethereum in a rather vulnerable position.
Network Activity
If we look at key technical indicators, we can see that Ethereum is exhibiting a clear decline in network activity, which could also be the reason for this slowdown. Following the Dencun upgrade, which was meant to improve Ethereum’s scalability, security, and overall efficiency, transaction fees on the network dropped significantly.
Moreover, Ethereum is also showing weaker performance compared to Bitcoin in terms of transaction count. While Bitcoin transactions hit a new record this year, shortly after the halving, Ethereum’s transaction count has fallen dramatically, reaching the lowest levels since July 2020.
Supply Dynamics
Ethereum might be feeling the negative effects of adverse supply dynamics. Ethereum’s supply has been rising since April and was estimated at approximately 120.32M at the time of writing. According to experts, an increase in supply stands as an obstacle to price appreciation, which could explain why Ether hasn’t been able to keep up with Bitcoin or some of the other altcoins.
Investor sentiment is also a factor that might play a role in Ethereum’s lackluster performance as of late. It seems like investors are growing fonder of Bitcoin while Ethereum is not as appealing anymore. This shift in investor sentiment is best reflected by the decline in ETH’s spot trading volume compared to Bitcoin.
Final Considerations
Seeing Ethereum lose value to Bitcoin is definitely not good news for the network or its supporters. However, just because the altcoin is not as close to Bitcoin as it once was doesn’t cancel out its achievements. For all intents and purposes, Ether is a very resilient and valuable crypto supported by a powerful and highly innovative blockchain, so it has all the data to push forward and maintain its position in the market. If Bitcoin turns its engines on and goes on a bull run, it’s quite likely Ethereum will do the same and even reduce this growing gap.
