Key Points
Since the start of the year, Ethereum (ETH) has been on the rise, although it began to slow down in mid-March.
Compared to Bitcoin’s (BTC) 57% gain, ETH has only managed to accrue roughly 48% in its USD pairs since the start of the year.
ETH versus BTC
Over the past few days, ETH has been lagging behind BTC due to several reasons, including a drop in network activity and declining sentiment surrounding the approval of Ethereum ETFs in May.
Compared to Bitcoin and other top layer 1 tokens, Ethereum has underperformed, with a 13.5% decline over the last 30 days.
During the same period, BTC’s price has only dropped by 4%, while other top-cap layer 1 tokens such as BNB Chain’s BNB and Solana’s SOL have seen increases of 15.5% and 16% respectively.
On March 8, the ETH/BTC ratio began to fall, hitting its lowest point for the year on April 7 at $0.047.
Several factors have contributed to Ethereum’s underperformance against Bitcoin over the past month, including new all-time high prices, over $10 billion in investments into the spot BTC ETF, and a surge in Bitcoin Ordinals trading volume to nearly $3 billion.
The upcoming Bitcoin supply halving, which has typically been followed by a crypto market bull run, has also boosted BTC.
A decrease in on-chain activity is a key factor in Ethereum’s underperformance.
An examination of Ethereum’s network activity, including its scaling solutions, can provide insight into why ETH continues to lag behind BTC.
Decentralized applications (DApps) are at the heart of this layer 1 blockchain, and a decrease in their use in terms of users and volumes suggests a lower demand for ETH.
Data from Web3 data aggregator DappRadar reveals that over the past 30 days, the top Ethereum DApps have seen an average decrease in the number of active addresses by 6.42%.
Over the same period, transaction volume for Ethereum DApps has dropped by 26.51%, driven by decreases in Uniswap, MetaMask Swap, Blur, and OpenSea.
Additional data from Coinglass shows a decline in Ethereum’s network activity over the last 30 days, with daily active addresses dropping from 622,963 on March 20 to 499,448 on April 10.
Despite Ethereum still being the leading network in the DeFi sector, Solana has recently gained market share in this segment in terms of on-chain activity, fueled by the memecoin frenzy and stablecoin transfer volume.
The decreasing likelihood of an Ethereum exchange-traded fund (ETF) being approved by May is also contributing to ETH’s bearish momentum and lack of strength against Bitcoin.
VanEck CEO Jan van Eck recently expressed his skepticism about the approval of spot Ether ETFs by the U.S. Securities and Exchange Commission in May.
In an interview with CNBC on April 9, van Eck stated that he believes VanEck’s Ethereum ETF application will likely be rejected.
VanEck and Cathie Wood’s ARK Invest were among the first wealth management firms to apply for a spot in the Ethereum ETF in the U.S., and both are awaiting the SEC’s final decision on their applications, which is due on May 23 and May 24 respectively.
Van Eck explained that the SEC typically provides comments on ETF applications and maintains ongoing engagement with applicants, but there has been a noticeable silence regarding Ethereum.
Bloomberg ETF analyst Eric Blachunas, who previously estimated a 70% chance of an Ethereum ETF approval by May, has recently reduced this to 35%, citing the lack of communication from the SEC to issuers as a potential negative sign for those hoping for Ether ETF approvals by May.
Analyst James Seyffart also voiced concerns about the SEC’s lack of action, questioning why there has been no communication when the applications were expected.
