- The ETH/BTC ratio plunged to new lows on Tuesday after Bitcoin reached a new all-time high.
- Bitcoin and Solana have beaten Ethereum in terms of institutional capital inflows and meme coin volume, the two main drivers of the current bull market.
- Ethereum needs a stronger narrative, global brand strength and increased on-chain activity to catch up with Bitcoin.
Bitcoin (BTC) has outperformed Ethereum (ETH) in the past two years, setting new highs while the top altcoin struggles to catch up with speed. Several experts exclusively revealed to FXStreet that Ethereum needs global recognition, a stronger narrative and increased on-chain activity for the tide to shift in its favor.
Why Bitcoin has outperformed Ethereum
Bitcoin (BTC) reached a new all-time high on Tuesday, smashing its previous record of $93,477 as Ethereum (ETH) lagged following a 1% decline. The recent price action summarizes how Ethereum has performed relative to Bitcoin in the past two years. This is visible in the ETH/BTC ratio downtrend in the past 24 hours, reaching lows last seen in March 2021.
ETH/BTC weekly chart
While many thought ETH had broken out of the downtrend after seeing a surge in early November, it flipped downwards again last week.
The decline dates back to September 2022, before the FTX crash, which sent ripple effects across the crypto market. Since the event, Bitcoin has risen over 470% while Ethereum manages just 170%.
Along the way, Bitcoin has flipped previous records and set new all-time highs above the $90,000 threshold from a low of $16,500 in November 2022. On the other hand, Ethereum trades near $3,100, 36% below its all-time of $4,878, established in November 2021.
A notable cause for Bitcoin's incredible growth over ETH is the huge institutional inflows it has seen following the launch of Bitcoin ETFs in January. Most crypto community members tipped Ethereum to see a similar action after ETH ETFs launched on July 23. However, the ratio deepened after ETH ETFs launched in July.
Philipp Zentner, CEO and co-founder of LI.FI protocol exclusively mentioned to FXStreet that the underperformance could be due to the narratives surrounding both assets.
"BTC is a digital gold/store of value while ETH's value proposition is more complex. It revolves around actual utility and usability, and there are a lot more L1s with similar value propositions, making it difficult to compare them 1:1," said Zentner.
He also noted how, unlike previous cycles where ETH benefited from the Main chain hosting most of the general crypto market activity, faster transaction times and low fees in Layer 2 networks have altered market dynamics.
Meanwhile, Solana has recently proven to be a strong competitor for Ethereum, dominating on-chain trading volumes in the past weeks. This has also largely affected how ETH fairs relative to Bitcoin.
Ethereum has largely been losing the battle when compared on the basis of the two major drivers of the current bull cycle — institutional capital and meme coin activity.
Solana has hosted most of the meme coin activity in the current cycle due to its better user experience over Ethereum in terms of transaction speed and low fees.
"Bitcoin, on the other hand, has much stronger brand recognition and, much like some other assets traded because of their associations, is not attached to fundamentals," James Davies, CEO of Crypto Valley Exchange, stated in an exclusive quote to FXStreet.
"Bitcoin transactions don't scale to meet aspirations, in the same manner that gold is not convenient at a higher level. However, its value is now detached from fundamentals," he added.
Eneko Knörr, CEO and co-founder of Stabolut, echoed a similar sentiment, highlighting how Bitcoin's brand influence has scaled in the traditional financial landscape.
"High-profile endorsements [...] from President-elect Donald Trump and other politicians pledging to create Bitcoin reserves, along with bullish predictions from CEOs of major financial institutions like BlackRock and VanEck, have bolstered its appeal," said Knörr.
"While Bitcoin has successfully broken out of the niche crypto community to become a globally recognized and trusted asset among investors, Ethereum still lags behind in terms of brand strength and recognition as a reliable and popular investment," he added.
According to Zentner, Davies and Knörr, Ethereum needs to overcome key challenges for the tide to shift in its favor. These include global recognition, stronger narrative, increased activity and higher accessibility like Bitcoin.
Cryptocurrency prices FAQs
Token launches influence demand and adoption among market participants. Listings on crypto exchanges deepen the liquidity for an asset and add new participants to an asset’s network. This is typically bullish for a digital asset.
A hack is an event in which an attacker captures a large volume of the asset from a DeFi bridge or hot wallet of an exchange or any other crypto platform via exploits, bugs or other methods. The exploiter then transfers these tokens out of the exchange platforms to ultimately sell or swap the assets for other cryptocurrencies or stablecoins. Such events often involve an en masse panic triggering a sell-off in the affected assets.
Macroeconomic events like the US Federal Reserve’s decision on interest rates influence crypto assets mainly through the direct impact they have on the US Dollar. An increase in interest rate typically negatively influences Bitcoin and altcoin prices, and vice versa. If the US Dollar index declines, risk assets and associated leverage for trading gets cheaper, in turn driving crypto prices higher.
Halvings are typically considered bullish events as they slash the block reward in half for miners, constricting the supply of the asset. At consistent demand if the supply reduces, the asset’s price climbs.
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