3 Reasons Ethereum Is Falling Behind Bitcoin in 2024

Ethereum has dropped to a 40-month low in its ETH/BTC trading pair, and data indicates that this downward trend is likely to persist.

Source: coinmuhendisi.com

Ether's price is currently at a 40-month low relative to Bitcoin, lagging behind BTC's performance in 2024. ETH is only 0.02% above its January 1st opening, whereas Bitcoin has surged around 36% this year. Let’s explore some of the reasons behind Ether’s ongoing underperformance.

ETH Has Declined Relative To BTC Over The Past 90 Days

Ether has fallen by 34% over the past 90 days, significantly underperforming Bitcoin, which has only decreased by 15% during the same period. The ETH/BTC ratio has also dropped approximately 22% in the last three months, hitting a multi year low of 0.04057 on September 11. This decline in the ETH/BTC ratio suggests reduced demand for Ether, with investors showing a preference for Bitcoin. In comparison, US spot Bitcoin ETFs have performed better since their approval by the SEC on January 10, compared to spot Ethereum ETFs. Onchain data provider reports that these investment products have a more substantial impact on Bitcoin's price (8% of spot volume) than on Ether's price (1% of spot volume).

Bitcoin's Market Dominance Keeps Increasing

In addition to Ether’s disappointing performance relative to Bitcoin, ETH has also been negatively impacted by the ongoing increase in Bitcoin dominance. Bitcoin’s market dominance has been on a steady upward trajectory throughout 2024, reaching a 40 month high of 58% on August 5. This significant rise indicates that Bitcoin is gaining strength relative to altcoins, including Ether. Bitcoin dominance measures BTC’s market capitalization as a percentage of the total cryptocurrency market, providing a snapshot of its relative strength and overall market influence. It is a key indicator often used by investors to gauge market sentiment and the relative confidence in Bitcoin compared to other cryptocurrencies.

With Bitcoin dominance continuing to increase, the ETH/BTC ratio is expected to keep falling. This trend suggests that investors are increasingly bullish on Bitcoin and may be allocating less capital to Ether. As a result, Ether’s value against Bitcoin is likely to remain under pressure, reflecting a broader shift in investor preference towards Bitcoin and away from altcoins like ETH.

Ethereum's On-Chain Activity Shows Decline Amid Rising Competition

Tracking the number of active addresses on Ethereum provides a clear and reliable insight into the network's actual usage and the demand for its native token. Currently, the 30-day average of 430,250 daily active addresses represents a 7.7% decline compared to 90 days ago, far below the peak of 686,350 in May 2021. This decrease in on-chain activity suggests a notable reduction in user interaction with the layer-1 blockchain, indicating a drop in Ether (ETH) transactions.

When analyzing the number of unique active wallets (UAWs) across the Ethereum blockchain, we gain a broader understanding of DApp usage. DAppRadar data reveals that active addresses interacting with Ethereum DApps have fallen by 19% in the last 30 days. In contrast, rival blockchains like Solana and Tron have seen surges of 257% and 343%, respectively, during the same period. For ETH to break past the $2,400 mark, the network must witness consistent growth, higher transaction volume, and increased DApp adoption.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.