Ethereum (ETH) is currently undergoing a tumultuous period, grappling with significant selling pressure and fear in the market following a staggering 23% decline that has brought its price down to yearly lows at $2,200. The ongoing underperformance of ETH compared to Bitcoin has been a cause for concern among investors, with the trend persisting since September 2022. Over this period, Ethereum has witnessed a sharp decline of 44% against Bitcoin, prompting scrutiny into the reasons behind its struggles.
A recent report from CryptoQuant sheds light on various factors that may be impacting Ethereum’s performance. Declining on-chain activity, shrinking institutional interest, and the lackluster performance of Ethereum ETFs in comparison to Bitcoin are cited as key contributors to ETH’s struggles. In particular, the ETH/BTC pair has plummeted to 0.0425, marking its lowest level since April 2021.
Ethereum’s underperformance appears to be closely linked to weaker network activity dynamics when juxtaposed with Bitcoin. For instance, the total transaction fees on the Ethereum network have been on a downward trajectory, largely attributed to lower fees post the London upgrade. The relative transaction count has also witnessed a substantial decline, dropping from a peak of 27 in June 2021 to 11, one of its lowest levels since July 2020.
Furthermore, Ethereum’s supply dynamics are not conducive to a price surge. The total supply of ETH has been steadily increasing following the London upgrade, reaching a current supply of 120.323 million ETH, the highest level since May 2023. Additionally, traders and investors have displayed a clear preference for Bitcoin over Ethereum, as evident from the diminishing spot trading volume ratio of ETH to Bitcoin from 1.6 to 0.76 in the past week.
As of now, Ethereum (ETH) is trading at $2,262, grappling with the repercussions of a significant 23% drop from its recent highs. Volatility and uncertainty continue to dominate the market sentiment as Ethereum teeters near its yearly lows of approximately $2,200. The cryptocurrency remains considerably below its 4-hour 200 moving average (MA) standing at $2,565, a crucial indicator that typically signals market strength.
In order for bulls to regain control, it is imperative for the price to breach this moving average and challenge the local highs at $2,600. However, failing to maintain support at the yearly low of $2,200 could plunge the price into a deeper correction phase, possibly heralding the onset of a bear market. This critical juncture holds the key to ETH’s short-term recovery, as a breach might trigger additional selling pressure, underscoring the urgency for bulls to reclaim vital levels to avert a prolonged bearish trend in Ethereum’s trajectory.
Overall, Ethereum’s struggles compared to Bitcoin stem from a myriad of factors encompassing on-chain activity, institutional interest, supply dynamics, and trading volume preferences, painting a challenging outlook for ETH as it navigates through turbulent market conditions.
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