In recent times, Ethereum (ETH) has been facing significant selling pressure and fear in the crypto market. The digital asset has experienced a 23% decline, bringing its price down to yearly lows at $2,200. One major concern for investors is the ongoing underperformance of Ethereum compared to Bitcoin. Since September 2022, Ethereum has fallen 44% against Bitcoin, raising questions about the reasons behind its struggle.
A recent report from CryptoQuant sheds light on several factors affecting ETH’s performance. Declining on-chain activity, shrinking institutional interest, and the underwhelming performance of Ethereum ETFs compared to Bitcoin are among the key contributors to Ethereum’s struggles. The ETH/BTC pair now sits at 0.0425, its lowest level since April 2021, indicating the extent of Ethereum’s underperformance.
Ethereum’s weaker network activity dynamics compared to Bitcoin have also played a role in its struggles. For example, Ethereum’s total transaction fees have continued to decline, mainly due to lower fees after the Dencun upgrade. The relative transaction count has also seen a significant drop, falling from a record high of 27 in June 2021 to 11, one of the lowest levels since July 2020. Additionally, the total supply of ETH has steadily grown since early April, reaching 120.323 million ETH, the highest level since May 2023.
Traders and investors have shown a clear preference for Bitcoin over Ethereum, as evidenced by the drop in relative spot trading volume of ETH to Bitcoin from 1.6 to 0.76 in the past week. Historically, Ethereum’s price has risen relative to Bitcoin when its trading volume outperforms Bitcoin’s. However, given the current trends and factors affecting Ethereum, it may continue to underperform compared to Bitcoin in the near future.
As of now, Ethereum (ETH) is trading at $2,262 after a significant 23% drop from its recent highs. Volatility and uncertainty continue to drive the market as ETH tests local demand near its yearly lows of around $2,200. The cryptocurrency remains below its 4-hour 200 moving average (MA) at $2,565, a critical indicator of market strength. For bulls to regain control, the price must break above this moving average and challenge the local highs at $2,600.
However, if Ethereum fails to hold support at its yearly low of $2,200, it may enter a deeper correction phase, potentially signaling the beginning of a bear market. This level is crucial for ETH’s short-term recovery, and losing it could trigger further selling pressure. Bulls need to reclaim key levels in order to prevent Ethereum from slipping into an extended bearish trend.
Ethereum’s struggles in the crypto market can be attributed to a combination of factors including declining on-chain activity, diminishing institutional interest, and weaker network dynamics compared to Bitcoin. The preference for Bitcoin over Ethereum among traders and investors has also contributed to Ethereum’s underperformance. Moving forward, it will be essential for ETH to address these issues and regain momentum to avoid further downside in the coming weeks.
Leave a Reply