TL;DR
- The ETH/BTC ratio has dropped to 0.027, its lowest level in over four years, due to institutional preference for Bitcoin ETFs.
- Ethereum has lost strength in terms of participation and adoption, with rising inflation and declining fee revenues, now ranking sixth in the industry.
- The Pectra upgrade could change the landscape, but a lack of institutional demand and clear leadership creates uncertainty in Ethereum’s ecosystem.
The cryptocurrency market has witnessed a significant shift in the value relationship between Bitcoin and Ethereum. The ETH/BTC ratio has fallen to 0.027, a level not seen in over four years. While Bitcoin continues to attract institutional investors, Ethereum faces both technical and economic challenges that have limited its growth compared to its main competitor.
One of the key factors behind this decline is the strong preference for Bitcoin ETFs, which have accumulated approximately $35 billion in investments, while Ethereum-based products have only secured $2.6 billion. This disparity makes it clear that Bitcoin remains the dominant choice for major investors like MicroStrategy, while Ethereum has yet to gain similar momentum.
Ethereum and the Threat of Inflation
Adding to the concern is a worrying trend: Ethereum’s supply has been increasing at a rate of 5.4% since February 2024, partially reversing the deflationary effect expected after the Merge upgrade. This has raised doubts among investors, as Ethereum was supposed to become scarcer over time, but in practice, its supply has returned to pre-proof-of-stake transition levels from 2022.
Another key issue is the decline in Ethereum’s fee revenue, which now ranks sixth behind platforms like Solana and USDC, according to Token Terminal. In contrast, Solana has captured over 50% of trading volume in DEXs, thanks to its speed and lower transaction costs, though part of this volume comes from speculative projects like “pumpdotfun.”
Can Pectra Change the Narrative?
However, Ethereum’s ecosystem still has cards to play. The Pectra upgrade, scheduled for March 2025, could bring significant improvements in scalability and efficiency. According to Vitalik Buterin, these changes could be key to reversing the bearish trend. Nonetheless, the Ethereum community faces a lack of clear leadership, with internal tensions within the Ethereum Foundation adding to the uncertainty about the platform’s future.
Despite these challenges, cryptocurrency history has shown that major opportunities often arise in times of doubt. While Bitcoin continues to dominate institutional interest, Ethereum might be in an accumulation phase before a new bullish move. Will the Pectra upgrade be the catalyst Ethereum needs?
