In recent months, the price of Ethereum (ETH) has struggled to maintain a position of strength in the cryptocurrency market, particularly compared to Bitcoin (BTC).
The second largest cryptocurrency in the world has seen a significant drop in its performance compared to Bitcoin, reaching 42-month lows in the ETH/BTC ratio. This trend has raised concerns among investors, leading many to wonder if Ether will continue to lose ground against Bitcoin or if we are close to a local minimum.
ETH/BTC hits new 42-month lows: problems with the price of Ethereum?
One of the key indicators of this bearish trend for Ethereum is the pair ETH/BTC, which measures the performance of Ether compared to Bitcoin. Recently, the ETH/BTC ratio has reached levels not seen for about three and a half years, dating back to early 2021.
At the time, the cryptocurrency market was experiencing a huge bull phase, driven by institutional interest and the growing adoption of Bitcoin as a store of value.
Since then, while Bitcoin has continued to consolidate its position as the undisputed market leader, Ethereum has encountered difficulties in keeping up, despite the continuous development of its ecosystem and the transition to the Proof of Stake (PoS) consensus mechanism with the Ethereum 2.0 update.
A factor that is contributing to the weakness of Ethereum compared to Bitcoin is the growing market dominance of BTC. In a context of macroeconomic uncertainty and high volatility in the cryptocurrency market, Bitcoin is often perceived as a safer store of value compared to other criptovalute.
This has led many investors to prefer BTC, especially during phases of market turbulence, when capital tends to shift towards more established and less risky assets.
As a result, the market share of Ethereum has decreased, contributing to the decline of the ETH/BTC pair.
This phenomenon has raised doubts about whether Ether can maintain its long-term relevance as the main platform for decentralized applications (dApp) and decentralized finance (DeFi), or if Bitcoin will continue to gain ground even in sectors traditionally dominated by Ethereum.
The risks of a further decline for the price of Ethereum (ETH)
With the price of ETH falling, many investors are looking for signals that might indicate a local minimum for the cryptocurrency. At the moment, the price of Ethereum is around 2,302 dollars, a level considered critical by technical analysts.
The question that many are asking is whether Ethereum has finally reached a solid support from which it can restart, or if we will witness further declines in the coming weeks.
One of the most accredited theories is that, if Bitcoin were to experience a strong rebound from the current levels, Ethereum could benefit indirectly, following the general trend of the cryptocurrency market.
However, without a significant recovery in the ETH/BTC ratio, Ethereum risks continuing to lose market share, even if its price in dollars were to maintain a certain stability.
Besides the growing dominance of Bitcoin, there are other factors that could weigh on the price of Ethereum in the coming months.
First of all, the competition in the dApp and DeFi sector is becoming increasingly fierce, with platforms like Solana (SOL), Cardano (ADA) and Avalanche (AVAX) trying to gain ground by leveraging their superior scalability and speed compared to Ethereum.
Secondly, despite the success of the upgrade to Ethereum 2.0, the network continues to struggle with scalability issues and high fees, which could push some developers and users to seek alternative solutions.
This could further weaken Ethereum’s position as the leading platform for decentralized applications.
Conclusions
Despite the current difficulties, it is important to remember that Ethereum continues to be the second cryptocurrency by market capitalization and enjoys a wide base of developers and supporters. Its ecosystem is constantly evolving, with a growing focus on Layer-2 solutions like Optimism and Arbitrum, which could solve scalability issues and reduce fees.
Furthermore, the adoption of Ethereum in DeFi remains robust, with billions of dollars locked in smart contracts on its network. This indicates that, despite the challenges, Ethereum still has a crucial role in the future of the cryptocurrency sector.
The price of Ethereum (ETH) is currently facing a phase of great uncertainty, with the ETH/BTC ratio hitting 42-month lows. The growing dominance of Bitcoin (BTC) and competition with other emerging blockchains are putting pressure on the world’s second-largest cryptocurrency.
However, if Ethereum manages to solve its scalability issues and consolidate its role in the DeFi, it could start gaining ground again.
Until then, investors should closely monitor the performance of the ETH/BTC pair to understand if we have indeed reached a local minimum or if there is still room for further bear movements.
