3 Reasons Why Ethereum Price Will Continue to Underperform BTC in 2024
Ether (ETH) had a strong start to the year but began to taper off in mid-March. Although ETH is awaiting approval of Spot Ethereum ETFs in the United States in mid-May, it has underperformed Bitcoin (BTC).
ETH is up about 60% in the last 12 months.
The New Digital Assets: Insights and Market Trends report, a joint publication from CME Group and Glassnode, outlines some of the reasons why ETH will underperform BTC in 2024, as discussed below.
Ether continues its downward trend against BTC in 2024.
Data from Cointelegraph Markets Pro and TradingView show that Ether experienced relatively deep corrections in 2024, with the largest decline being 31% between March 12 and May 1. In contrast, Bitcoin is down 23 percent over the same period.
Highlighting, Ether's downtrend profile has experienced deep corrections compared to Bitcoin, with the biggest drop of -42% in the 2022-24 cycle so far. Previous cycles have seen corrections of more than -65% in both early and late phases of macro bull markets.
The Glassnode-CME Group report noted that “the ETH/BTC ratio will continue to decline” in the 2023-24 cycle, indicating that overall investor appetite is low for the current cycle.
According to the chart below, the ETH/BTC ratio has trended lower since the merger, indicating a period where Bitcoin outperformed Ethereum, a trend that is still playing out.
The report documents several reasons for Ether's underperformance, including the approval of spot Bitcoin ETFs in the US in January 2024 and increased competition from other proof-of-stake blockchains.
However, as US spot ETFs graduate to Ethereum, this could provide impetus for a reversal in this bearish trend.
ETH's proven volatility in 2024 remains below previous cycles.
Using Onchain metrics from market intelligence firm Glassnode, the report analyzed the Market Value Realized Value (MVRV) ratio to measure investors' overall profitability. The MVRV ratio tracks the difference between market cap and realized cap and expresses the average unrealized profit or loss held by the market.
Although this ratio has improved consistently since October 2023, the current value of around 1.8 is still below the peaks of 6.2 and 3.8 seen in the 2017 and 2021 bull cycles.
In comparison, the report shows Bitcoin's MVRV ratio at around 2.5, indicating that the average BTC investor holds more unrealized profit than ETH investors.
This means that the investors still value BTC more than ETH and put their money in the pioneer cryptocurrency instead of Ether.
This sentiment is shared by K33 Research, which says that although ETH has mirrored BTC's performance throughout the year, with the ETH/BTC ratio stubbornly trading at 3-year lows, the market is “underperforming Ether.”
K33 Research Senior Analyst Vettel Lunde wrote:
“We believe the market underestimates the impact of the ETH ETF and predicts that the US ETH ETF will take 1% distribution of ETH supply.”
Similar to Glassnode and CME Group, Lunde said he expects “ETH ETF performance to outperform ETH in H2 2024.”
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ETH futures trading volumes follow that of Bitcoin
According to a Glassnode and CME Group report, futures markets continue to be a major source of trading in digital asset markets, generally “five to ten times larger than spot trading volume.”
Although Ether's open demand in 2016 Although it will peak in 2024, reaching a peak of $17.09 billion on May 29, according to Glassnode data, derivatives trading volume is still much lower than Bitcoin.
High futures trading volumes indicate high investor confidence and enthusiasm, which results in more buying and higher prices.
The chart below shows the increase in trading volume in futures markets since October 2023, with Bitcoin trading at over $34.4 billion in daily contracts compared to Ethereum at $26.7 billion.
Although they remain below the highs seen in the first half of 2021, daily trading volume of this size is similar to the previous market cycle.
Although Ether has underperformed compared to Bitcoin, analysts are hopeful that the Ethereum ETFs space will see ETH reach new highs, as some speculate that Wall Street will use it as a bet on Web3's growth. Others estimate that the spot Ethereum ETFs could attract more than $15 billion in the first months, pushing the price of ETH to $10,000 in this cycle.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
