More than 19 months after Ethereum’s historic Merge upgrade, it is evident that the network’s native asset, Ether (ETH), is struggling to keep up with Bitcoin (BTC). The ETH/BTC price ratio hit a three-year low on Thursday at 0.044, marking a decrease in Ether’s market dominance against Bitcoin compared to May of 2021. This trend has left Ethereum bulls puzzled and disappointed, as many had anticipated ETH to outperform Bitcoin following the September 2022 Merge upgrade. The introduction of a proof of stake consensus mechanism, along with a 90% reduction in ETH’s inflation rate post-upgrade, positioned ETH as a potentially more attractive investment compared to Bitcoin. Despite these bullish properties, ETH/BTC has fallen by 45% since the Merge, even amidst a general bull market in the crypto space over the last 18 months.
Crypto fund founder Joe McCann expressed his disillusionment with Ethereum’s performance, suggesting that the dream of “the flippening,” where ETH’s market cap surpasses that of BTC, has turned into a nightmare. McCann argued that Bitcoin is considered “ultrasound money” and Solana is the “global supercomputer,” while claiming that Ethereum does not possess either of these attributes. Moreover, experts at CryptoQuant have pointed out that the DenCun upgrade in March 2024 no longer positions Ether as “ultrasound money,” as it reintroduced inflationary properties to the currency, undermining its value proposition as a store of value against Bitcoin.
Recent advancements in technical capabilities have enabled developers to bring features once exclusive to Ethereum to the Bitcoin network. These include Ordinals NFTs, Runes trading, and the BitVM framework for smart contracts and layer 2 networks on Bitcoin. As a result, Bitcoin has gained popularity as a platform for NFT trading, surpassing Ethereum in this regard. However, Ethereum is also facing regulatory challenges, particularly concerning the potential approval of an Ether spot ETF. Legal obstacles from regulatory bodies like the U.S. Securities and Exchange Commission pose threats to Ether and other altcoins, potentially leading to legal repercussions against exchanges and companies involved with these assets.
While Solana (SOL) has recorded a remarkable 665% increase in value over the past year, Ether’s performance has been more modest, with a 61% rise in price. Ether’s total market dominance has decreased to 15.1%, significantly lower than Bitcoin’s dominance at 54.5%, as reported by CoinMarketCap.
The decline of Ethereum against Bitcoin reflects a shifting landscape in the cryptocurrency market. Despite initial optimism following the Merge upgrade, Ethereum’s struggles to maintain its position against Bitcoin and emerging competitors like Solana raise questions about its future trajectory. Technical innovations and regulatory challenges further complicate Ethereum’s outlook, emphasizing the need for careful evaluation and strategic decision-making in the volatile crypto space.
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