The Price of ETH is at its Lowest Compared to BTC

The second-largest cryptocurrency by market capitalisation has been falling behind the price of Bitcoin for more than two years.

Why has Ethereum fared weaker than its competitors?

The ratio of Ethereum's price to Bitcoin's has fallen to a low not seen since March 2021. However, according to experts interviewed by The Block, Ethereum has the potential to reverse the trend compared to the main cryptocurrency, underlining the temporary nature of this trend.

The value of the trading pair Ethereum (ETH) / Bitcoin is at its lowest in three years, around 0.032, a level not seen since late March 2021. The downward trend in this ratio has continued since September 2022, when the ratio was at 0.085, accounting for about 60 per cent of the decline.

'Ether has maintained its status as the second-largest cryptocurrency by market capitalisation for several years, with a capitalisation of more than $374 billion, according to Coinmarketcap. This is more than three times the value of the two closest competing cryptocurrencies: Solana (SOL), a blockchain-based cryptocurrency, and the USDT stablecoin of Tether. Their capitalisation is $115 billion and $130 billion respectively.

'Ether is in an awkward situation,' cryptocurrency market analyst Stephen Zheng told The Block, pointing out that altcoin competes with Bitcoin as a means of storing value and, as a platform for smart contracts, is struggling with Solana.

'This has led investors to be uncertain about its value proposition, at least in the short term,'

added Stephen Zheng.

The price of ETH has risen more than 70 per cent since early September 2022, reaching $3.13k on 21 November, according to data from the TradingView platform, when the ratio to Bitcoin had reached a year's high. Meanwhile, Bitcoin's price increased by more than 400% over the same period. The price of Solana has risen by over 600% in the same period.

Rachel Lucas, representative of crypto platform BTCMarkets, noted that the downward momentum towards Bitcoin was created by Ethereum after The Merge update, which was the biggest technical change in the second cryptocurrency blockchain. Lucas pointed out that this has led to regulatory uncertainties regarding its potential classification as a security in the US.

The difficulties of regulating ETH in the US are also supported by the words of Ethereum Foundation executive director Ai Miyaguchi - she said that the foundation was advised not to engage in any financial activities in 2024 due to regulatory complexities, which affected disclosure.

Ethereum Outlook

Analysts believe that despite its low price performance relative to its closest competitors, Ethereum remains one of the most active blockchain networks on the market.

‘If the bitcoin rally abates or market sentiment on Ethereum improves, perhaps due to technical updates or renewed interest in its use cases, there is potential for a rebound in the odds against bitcoin,’ Lucas noted.

Ethereum's current price performance doesn't necessarily mean that this will be the case in the coming years, according to Peter Chang, head of research at Presto Research. He believes a more cryptocurrency-friendly environment will emerge under the Trump administration, which could positively impact the Web3 market as a whole, helping Ethereum ‘regain momentum.’

Also noted that ether developers have a lot of intellectual capital built up over the years, and it would be premature to rule out Ethereum given the achievements of the ether community.