Author: Nancy Lubale, CoinTelegraph; Translated by: Deng Tong, Golden Finance
ETH started the year strongly but has gradually weakened since mid-March. Although ETH gained momentum in mid-May due to the approval of a spot Ethereum ETF in the United States, it still underperforms Bitcoin.
Over the past 12 months, ETH is up about 60%, while BTC is up 87% in their respective USD pairs.
Ethereum and Bitcoin's performance so far this year. Source: TradingView
A new report jointly released by CME Group and Glassnode, “Digital Assets: Insights and Market Trends,” reveals some of the reasons why ETH will underperform BTC in 2024, as described below.
Ethereum price to Bitcoin will continue to fall in 2024
Data from Cointelegraph Markets Pro and TradingView show that Ethereum has experienced a relatively deep correction in 2024, with the largest drop of 31% between March 12 and May 1. In comparison, Bitcoin fell 23% during the same period.
ETH/USD daily chart and BTC/USD daily chart. Source: TradingView
Zooming in, Ethereum has experienced relatively deep pullbacks compared to Bitcoin, with the largest pullback so far in the 2022-24 cycle being -42%. In previous cycles, both the early and late stages of the macro bull run saw pullbacks of more than -65%.
The Glassnode-CME Group report also noted that in the 2023-24 cycle, “the ETH/BTC ratio continues to decline,” indicating that general investor risk appetite remains low in the current cycle.
According to the chart below, the ETH/BTC ratio has been trending downwards since the merger, marking periods when Bitcoin outperformed Ethereum, a situation that is still happening today.
ETH/BTC ratio. Source: Glassnode
The report documents a number of reasons for Ethereum’s underperformance, including the U.S. approval of a spot Bitcoin ETF in January 2024 and growing competition from other proof-of-stake blockchains.
“Nevertheless, with the launch of a US Ethereum spot ETF, this could be the catalyst to reverse this downward trend.”
ETH's realized volatility in 2024 is still lower than the volatility in previous cycles
Using on-chain metrics from market intelligence firm Glassnode, the report analyzed the market value to realized value (MVRV) ratio to measure overall profitability for investors. The MVRV ratio tracks the difference between market value and realized value and describes the average unrealized profit or loss held by the market.
The report noted that despite the steady improvement in this indicator since October 2023, its current value of approximately 1.8 is still well below the peaks of 6.2 and 3.8 during the 2017 and 2021 bull cycles.
Ethereum MVRV ratio. Source: Glassnode
In comparison, the report shows that Bitcoin’s MVRV ratio is around 2.5, indicating that the average BTC investor is holding larger unrealized profits than ETH investors.
This means that investors still believe that BTC is valued higher than ETH and they would rather put their money into the pioneer cryptocurrency than Ether.
This view is shared by K33 Research, who note that while ETH’s performance has mirrored BTC’s throughout the year, the market is “underestimating Ether’s potential” as the ETH/BTC ratio stubbornly trades near 3-year lows.
Vetle Lunde, senior analyst at K33 Research, wrote,
"We believe the market is underestimating the ETH ETF effect and forecast that the US ETH ETF will absorb 1% of the circulating ETH supply."
Similar to Glassnode and CME Group, Lunde said he expects “the ETH ETF effect could lead to ETH outperforming in the second half of 2024.”
ETH futures volume lags behind Bitcoin
According to a report by Glassnode and CME Group, futures markets remain the primary source of trading volume in the digital asset market, often “five to ten times larger than spot trading volume.”
Although Ethereum’s open interest remained high in 2024, reaching an all-time high of $17.09 billion on May 29, according to Glassnode, derivatives volumes remain significantly lower than Bitcoin’s.
High futures volume indicates high investor confidence and enthusiasm, which can lead to more buying and higher prices.
The chart below shows that futures market volumes have picked up since October 2023, with Bitcoin’s daily contract volume exceeding $34.4 billion, while Ethereum’s daily contract volume is $26.7 billion.
“Daily volumes of this magnitude are similar to previous market cycles, although they remain below the all-time peak seen in the first half of 2021.”
Despite Ethereum’s underperformance against Bitcoin, analysts remain optimistic that the spot Ethereum ETF will drive ETH to new highs as some speculate that Wall Street will use it to bet on the growth of Web3. Others speculate that the spot Ethereum ETF could attract more than $15 billion in the first few months, pushing ETH prices to $10,000 during this cycle.
