Ethereum Lags 44% Behind Bitcoin Since the Merge

Ethereum Underperforms Bitcoin by 44% Since The Merge

Ethereum has reportedly underperformed the top cryptocurrency, Bitcoin, by nearly 44% since its transition to Proof-of-Stake during The Merge event in September 2022. According to CryptoQuant, Ethereum has seen a significant decline, with the ETH/BTC price ratio currently sitting at 0.0425—its lowest level since April 2021.

Shift in Investor Sentiment Post-Merge

CryptoQuant’s latest weekly report highlights Ethereum’s performance downturn compared to Bitcoin, despite high expectations for its growth following The Merge. Even after the approval of U.S.-based Ethereum spot ETFs in July, Ethereum continued to decline, experiencing an 18% dip in value.

The Market Value to Realized Value (MVRV) ratio for the ETH/BTC pair now stands at 0.6. This indicates Ethereum may drop further before reaching its undervaluation zone, identified at a ratio of 0.45. The last time Ethereum reached this zone, its price was 0.02 compared to Bitcoin, signaling a potential further downside.

Ethereum’s Weak Network Activity Compared to Bitcoin

In addition to price performance, Ethereum’s network activity has shown signs of weakness compared to Bitcoin. A key metric in this regard is the cumulative transaction fees on the Ethereum network. The recent Dencun upgrade further decreased median transfer fees, contributing to Ethereum’s lagging performance.

• Ethereum’s transaction fees decreased due to the Dencun upgrade.
• Bitcoin’s network activity reached all-time highs, driven by new Layer 2 (L2) solutions and inscriptions.

Lower Transaction Count and Supply Dynamics Contribute to Ethereum’s Underperformance

Ethereum’s transaction count also dropped significantly, from 27 (a record high) to only 11. Traders appear to favor Bitcoin, as the spot trading volume ratio of Ethereum fell from 1.6 to just 0.76 last week.

Overall, CryptoQuant attributes Ethereum’s underperformance relative to Bitcoin to the following factors:

• Decreased network activity.
• Unfavorable supply dynamics.
• Lower transfer fees.

This combination of factors has led to Ethereum’s ongoing struggle against Bitcoin, with the outlook remaining uncertain as investors weigh the long-term impacts of The Merge.