- Analysts have signalled that factors such as inflationary supply dynamics, diminished network activity, and overall lack of demand for ETH are the main reasons for the coin’s underperformance.
- Since The Merge, ETH has underperformed Bitcoin by 44%, and is at its lowest level since April 2021.
- Bitcoin ETFs have witnessed hundreds of millions in outflows, leading investors to speculate on its long-term sustainability.
Oh, boy. It’s not looking good. But it’s definitely not looking good for Ether (ETH) holders. Data from CoinMarketCap shows ETH is currently trading at US$2,311 (AU$3,456), a 1.47% increase in 24 hours, but an 11.10% decrease in the last 30 days.
Meanwhile, the crypto market cap is sitting at US$1.96 trillion (AU$2.93 trillion), a 1.86% increase in the last day, indicating a consolidation.
What’s Driving ETH’s Underperformance?
Blockchain analytics platform CryptoQuant attributes this underperformance to factors such as inflationary supply dynamics and diminished network activity. It all begins with The Merge, which took place on Sept. 15, 2022.
Since The Merge, ETH has underperformed Bitcoin by 44%. The ETH/BTC price currently sits at 0.041—its lowest since April 2021.
This underperformance continued despite the approval of spot Ethereum exchange-traded funds (ETFs) in the US, which failed to generate the same surge in demand as Bitcoin’s ETF approvals earlier this year.
Related: Morgan Stanley Reports Substantial BTC ETF and MicroStrategy Stakes in SEC Filing
While VanEck’s spot ETH ETF is still trading (with heavy losses), the asset manager recently closed its futures-based ETF for obvious reasons—mainly ETH’s performance.
Going back to ETH’s performance, CryptoQuant’s report highlights how on-chain data shows that crypto investors increasingly favour Bitcoin over Ethereum, as evidenced by Ethereum’s declining spot trading volume relative to BTC.
ETH’s spot trading volume, once 1.6x higher than Bitcoin’s, has dropped to 0.76. Meanwhile, Ethereum’s network activity, particularly transaction fees, has notably declined since the Dencun upgrade went live in March 2023, reducing the fee burn rate and contributing to inflationary supply dynamics.
ETFs Witnessing Massive Outflows
Bitcoin funds have faced eight consecutive days of outflows, totaling over US$700 million (AU$1,046M). Overall, major withdrawals took place last week—US$287.8M million (AU$429M) on Tuesday, US$37 million (AU$55.3M) on Wednesday, US$211 million (AU$315.5M) on Thursday, and US$170 million (AU$254.3M) on Friday.
Fidelity’s FBTC fund was hit the hardest, leading losses on three of the four days. Researcher Jim Bianco stated that spot BTC ETFs have basically become a “small tourist tool and on-chain is returning to Tradfi”. Eric Balchunas, Senior analyst at Bloomberg, begged to differ.
If IBIT has like >$20b in assets (in 8mo btw) and that’s considered a failure then what word should be used to describe an ETF with $7M in assets?
Eric Balchunas, BloombergRelated: Monochrome Asset Management to Launch Ethereum ETF on Cboe Australia
Ethereum ETFs are not doing pretty well, either. Data shows most of these funds are practically dead regarding price movement.
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