Bitcoin’s soaring increase is far ahead, why can’t Ethereum keep up?

Bitcoin's Incredible Surge Leaves Ethereum Behind - What's Holding it Back?

Due to the speculation that spot Bitcoin and Bitcoin ETF in the United States may be approved, Bitcoin has rebounded for two consecutive weeks, while Ethereum has seen a moderate increase during the same period. The price of Ethereum relative to Bitcoin (ETH/BTC trading pair) continues to decline.

According to TradingView’s data, as of the time of writing, the ETH/BTC ratio is 0.05182, the lowest since mid-2021, close to the low point of around 0.049 in June 2022. The last time this ratio dropped below 0.049 was before May 2021.

Historical data shows that the high point of ETH/BTC usually occurs during bullish periods when Ethereum performs well, reaching as high as 0.085. However, the situation reverses during bear markets, with Bitcoin usually taking the lead.

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Meanwhile, Bitcoin’s growth continues to outperform most altcoins, driving its dominant position. Bitcoin’s dominance in the total cryptocurrency market cap has risen to 54.4%, the highest level since April 2021. A ratio of over 50% means that Bitcoin’s market value exceeds the sum of all other cryptocurrencies.

The data in the above chart shows that the index has been fluctuating between 39% and 49% over the past two years until it broke through this range in mid-June. This breakthrough coincided with the news of BlackRock’s application for a spot BTC ETF in the United States, when the price of Bitcoin rose above $30,000.

Why is Bitcoin’s growth far ahead?

An analyst pointed out that Bitcoin’s growth is far ahead due to spot ETF and safe haven narratives.

Recently, with Grayscale’s recent victory in court, as well as traditional financial giants such as BlackRock, Fidelity, Ark Invest, etc., applying for spot Bitcoin ETF, the community’s enthusiasm is high, and industry insiders believe that the Securities and Exchange Commission (SEC) approving the ETF is almost a done deal, which may unleash a new wave of demand for Bitcoin.

Crypto market analyst and author of Crypto Is Macro Now, Noelle Acheson, explains the rise of Bitcoin dominance in the market can be attributed to market cycles and the appeal of Bitcoin as a lower-risk asset compared to altcoins (including ETH).

Acheson points out, “Bitcoin often leads the cryptocurrency market in the early stages of a cycle and only loses its dominance when investors become more comfortable with the risk curve and smaller altcoins gain traction.”

Ethereum lacks a bullish narrative

According to a report released on Monday by digital asset management company CoinShares, investment products based on Bitcoin and Solana have seen inflows of approximately $112 million and $43 million respectively this month, while funds based on Ethereum have seen outflows of $4.7 million.

In fact, according to CoinShares’ report, Ethereum has seen the highest outflows of funds this year, totaling $119 million, followed by Tron.

CoinShares Research Director James Butterfill attributes the difference in the volume of BTC and Ethereum funds to people’s “expectations for a Bitcoin ETF” and “ongoing concerns about Ethereum.”

Noelle Acheson also points out that Bitcoin has the advantage of ETFs and a safe haven narrative, while Ethereum faces regulatory indifference and uncertainty over upgrades. Although Ethereum has always been at the forefront of the decentralized finance (DeFi) movement and pioneered smart contracts, network congestion and high transaction fees have been persistent issues, especially with the emergence of new competitors in the field.

Bitfinex analysts state in a report that the main bullish narrative in the market is BTC ETF products, while Ethereum lacks a convincing long-term narrative.

Earlier this month, six Ethereum futures-based ETFs were launched in the US. However, they opened with lackluster trading activity and failed to generate the same level of excitement and trading volume as the first BTC futures ETF, ProShares BITO, launched in October 2021.

David Duong, Research Director at Coinbase, stated that total trading volume for top ETH futures ETFs on their first day amounted to less than $1.5 million. In stark contrast, according to Bloomberg data, BITO had a trading volume exceeding $1 billion on its inception day. Furthermore, the net inflows into these ETH futures ETFs were less than 2% of BITO’s.

Benjamin Jarvis, co-founder of JLabs Digital, mentioned in a Bloomberg interview that “institutions may be more willing to invest in a Bitcoin spot ETF as they perceive it to be lower-risk compared to Ethereum futures.”

Normal capital rotation?

Data shows that BTC price has risen by 32% in the past month, while ETH has only risen by 12%. Looking at a longer time frame, Bitcoin’s price has doubled this year, while ETH has risen by approximately 50%.

The technical indicators analyzed by Crypto Daily show that Ethereum is currently facing resistance levels at $1,794 and $1,955. On the other hand, support levels are determined at $1,308 and $1,470, indicating that Ethereum may find some support around these price points. A report from Bitfinex suggests that the market is in the early stages of a bull market, with Bitcoin leading the way and then capital rotation into beta trades like Ethereum, which is normal.

John Glover, the Chief Investment Officer of cryptocurrency lending institution Ledn, believes that historically, when the price of Bitcoin rises, funds start flowing into altcoins. This means that the launch of one or more physical Bitcoin ETFs is likely to trigger the next major bull market in the entire crypto ecosystem.

Author: LianGuaiBitpushNews Mary Liu

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