A drop in the ETH/BTC ratio to a low of 0.04 USD highlights the worrying trend for ETH investors. While BTC has seen a solid rise in value this year, Ether is reportedly lagging behind. But what could be the reasons and causes of this gap?
ETH/BTC pair analysis
The analysis of the ETH/BTC pair shows a notable downward trend, with the pair losing up to 53% since the ETH Merge upgrade was completed . This drop in the ETH/BTC pair is partly due to the fact that the valuation of ETH dropped from -1.14 to -1.07. Furthermore, despite a small improvement from -1.19 to -1.16 in the valuation of the pair, the decline continues to be strong.
At the same time, the success of Bitcoin ETFs in the US after being approved by the SEC should be taken into account . This was much greater when compared to ETH ETFs. That is, the interest in investment products that are related to Bitcoin would be greater and would reduce the relative value of ETH.
The impact of these investment products on the BTC price is much higher (8% of spot volume) than on the Ethereum price (1%). But other reasons why Ethereum would be lagging behind Bitcoin would also have to do with market dominance and the decrease in onchain activity. Aspects that we will see below and that could even increase after the US elections that could catapult the price of BTC .
Reasons why ETH is lagging behind BTC
This year, Ether has significantly underperformed Bitcoin. The market-leading coin has grown by around 36%. Ether has only grown by a practically residual 0.02% since the beginning of this year. However, some analysts suggest that Ethereum could skyrocket by 180% .
A difference that is obviously reflected in the ETH/BTC pair, which fell by up to 34% in the last three months. Compared to a 15% reduction in the price of Bitcoin in this same period of time.
This difference would indicate an increasing preference among investors for Bitcoin instead of Ether. A preference that would also be driven by the perception that currently exists about the stability of the price of Bitcoin and its possible future growth.
Rise in Bitcoin Dominance
Bitcoin’s dominance in the crypto market continued to grow throughout this year. So much so that it reached a 40-month high of 58% in early August. Market dominance serves as an indicator of BTC’s strength over other cryptocurrencies. But it also measures capitalization relative to the market.
As this dominance continues to rise, the value of ETH against Bitcoin is expected to continue to fall. This would at the same time indicate that investors are favoring BTC, with less capital flowing into Ether investments.
On the other hand, onchain data also indicates a reduction in the activity of the Ethereum network. Something that would also add to the poor performance of Ether. In fact, the average has fallen by more than 7% in daily active addresses on its network compared to the last three months.
And not only that, active Dapp addresses on ETH fell by almost 20% in that same time frame. Something even more remarkable if you see how some blockchains such as Tron or Solana increased their total active addresses. Another reason for the difference in the ETH/BTC pair.
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