3 reasons why Ethereum price continues to underperform against BTC in 2024
Ethereum’s price has continued to underperform against Bitcoin throughout 2024, and several factors contribute to this trend. Despite starting the year strongly, Ether (ETH) began tapering off in mid-March. While there was a brief resurgence in mid-May due to anticipation of the approval of spot Ethereum ETFs in the United States, ETH has still lagged behind Bitcoin (BTC). Over the past 12 months, ETH has surged approximately 60%, whereas BTC has gained 87% in their respective USD pairs.
Data from TradingView shows that Ether has experienced relatively deeper corrections in 2024. The largest drawdown for ETH was 31% between March 12 and May 1, compared to Bitcoin’s 23% drop over the same period. Zooming out, Ether’s drawdown profile shows relatively deeper corrections than Bitcoin, with the largest drawdown in the 2022–24 cycle being 42%. In contrast, previous cycles have seen corrections exceeding 65% during both the early and later phases of macro bull markets. The Glassnode-CME Group report highlights that the ETH/BTC ratio has continued to decline during the 2023–24 cycle, suggesting that the general investor risk appetite is still low for the current cycle. Since the Merge, the ETH/BTC ratio has trended lower, marking a period where Bitcoin outperforms Ethereum, a scenario that remains ongoing.
Several reasons are noted for Ether’s underperformance. One significant factor is the approval of spot Bitcoin ETFs in the US in January 2024, which has diverted investor attention and capital towards Bitcoin. Additionally, increasing competition from other proof-of-stake blockchains has put further pressure on Ethereum. The Glassnode-CME Group report also analyzed the Market Value Realized Value (MVRV) ratio to gauge the overall profitability of investors. Although this metric has improved steadily since October 2023, its current value of around 1.8 is still far below the 6.2 and 3.8 peaks witnessed during the 2017 and 2021 bull cycles. In comparison, Bitcoin’s MVRV ratio stands at around 2.5, indicating that the average BTC investor holds larger unrealized profits than ETH investors. This sentiment is echoed by K33 Research, which notes that although ETH has mirrored BTC’s performance throughout the year, the market has underappreciated Ether’s potential.
Futures markets remain the primary source of trade volume in digital asset markets, generally being five to ten times larger than spot trading volumes. Although Ether’s open interest reached an all-time high of $17.09 billion on May 29, 2024, derivatives trading volumes remain significantly lower than those of Bitcoin. High futures trading volumes indicate high investor confidence and enthusiasm, which could lead to more buying and higher prices. Data shows that trade volumes in futures markets have picked up since October 2023, with Bitcoin seeing over $34.4 billion in daily contracts traded against Ethereum’s $26.7 billion. Daily trade volumes of this magnitude are similar to the previous market cycle, although they remain below the all-time high peaks seen during the first half of 2021.
Despite Ether’s underperformance relative to Bitcoin, analysts remain optimistic about the future. There is speculation that spot Ethereum ETFs will attract substantial investments, potentially propelling ETH prices to new highs. Some analysts believe that Wall Street will use these ETFs as a bet on Web3’s growth, and others speculate that the spot Ethereum ETFs could attract more than $15 billion during the initial months, potentially pushing ETH’s price to $10,000 during this cycle. This optimism suggests that while Ethereum may currently be underperforming, there is significant potential for a strong recovery and future growth.
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