Ethereum price weakens against Bitcoin – here’s why.

Ether (ETH) has been rallying since the beginning of the new year but started to fold in mid-March. The altcoin has trailed Bitcoin (BTC) since January 1, gaining roughly 48% compared to BTC's 57% year-to-date per USD pair.

There are three main reasons why ETH has underperformed BTC over the past several days, including a decrease in network activity and the approval of spot Ethereum ETFs in May.

ETH has trended lower against BTC over the past 30 days.

Ether is down 13.5% in the last 30 days, while Bitcoin and other top layer 1 tokens are underperforming. BTC's price has only fallen 4% over the past 30 days, while other high-cap Layer 1 tokens such as BNB Chain's BNB and Solana's SOL have gained 15.5% and 16% in the same time frame.

The ETH/BTC ratio started to decline on March 8th, reaching a year-to-date low of $0.047 on April 7th.

There are several reasons why Ether has underperformed Bitcoin over the past month, including new all-time high prices, more than $10 billion in investments into the spot BTC ETF, and Bitcoin Ordinals trading volume of nearly $3 billion. The upcoming Bitcoin supply halving, which has historically preceded crypto market bull runs, has added to BTC's tailwind.

A decrease in activity on the chain indicates a lower performance of ether

Examining Ethereum network activity, including scaling solutions, may provide insight into why Ether continues to outperform BTC. Decentralized applications (DApps) are an integral part of this layer 1 blockchain, and the decline in usage in terms of users and volumes indicates less demand for ETH.

Data from Web3 DappRadar shows that the top Ethereum decentralized applications (DApps) have seen an average decrease of 6.42% in active addresses over the past 30 days.

Over the past 30 days, Ethereum DApps have seen a 26.51% drop in transaction volume, fueled by declines in Uniswap, MetaMask Swap, Blur, and OpenSea.

Additional data from Coinglass shows that Ethereum network activity has decreased over the past 30 days (in separate metrics). Daily active addresses on Ethereum decreased from 622,963 addresses on March 20th to 499,448 on April 10th.

Although Ethereum remains the network to beat in the Diffie sector, Solana has recently taken market share in this segment, fueled by the memecoin frenzy and stablecoin transaction volume on the chain.

The SpotEther ETF may not arrive in May.

In addition to weakening on-chain metrics, the possibility of an Ethereum exchange-traded fund (ETF) approval in May will add to ETH's bearish momentum and lack of strength against Bitcoin.

VanEck CEO Jan Van Eck is the latest to express doubts about the approval of the SpotEther ETF by the US Securities and Exchange Commission in May.

In an interview with CNBC on April 9, Van Eck said he believes the multibillion-dollar investment firm's Ethereum ETF application will “probably be rejected.” VanEck and Cathi Wood's ARK Invest were among the first wealth management firms to register a position in the Ethereum ETF in the U.S. Both companies are awaiting the SEC's final decision on their filings, which are scheduled for May 23 and May 24.

Van Eck explained the regulatory process, noting that the SEC typically issues comments on ETF applications and engages with applicants on an ongoing basis. However, in the case of Ethereum, there is significant silence.

“The way the legal process goes is that regulators comment on your application, and that happened weeks and weeks before the Bitcoin ETF, but now the pin is dropping with regard to Ethereum.”

Bloomberg ETF analyst Eric Blachunas, who previously held a 70% approval rating for the Ethereum ETF in May, is also pessimistic, recently reducing the probability to 35%, saying the lack of communication from the SEC to issuers could be a bad sign. Those hoping for Ether ETF approvals in May.

Fellow analyst James Seifert expressed concern over the SEC's inaction, questioning the reasons for the lack of communication when the filings are pending.

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.