ETH started the year strong but tapered off in mid-March. Although ETH gained momentum in mid-May amid anticipation of approval of spot Ethereum ETFs in the United States, it remained active worse than Bitcoin.
The leading altcoin by capitalization is up around 60% over the past 12 months compared to BTC's 87% gain in corresponding USD trading pairs.
ETH and BTC's year-to-date performance | Source: TradingView
The new Digital Assets Report: Insights and Market Trends – a joint publication by CME Group and Glassnode – has revealed several reasons why ETH underperformed BTC throughout 2024.
ETH continues to trend lower against BTC in 2024
According to data from TradingView, ETH encountered relatively deeper corrections in 2024, with the largest drop of 31% between March 12 and May 1. In comparison, Bitcoin is down 23% over the same period.
Daily ETH chart and daily BTC chart | Source: TradingView
Zooming out the chart, ETH has had relatively deeper corrections than Bitcoin, with the largest drop in the 2022-2024 cycle being -42% so far. Previous cycles have had corrections exceeding -65% in both the early and late stages of the macro bull market.
The Glassnode-CME Group report also notes “the ETH/BTC ratio continues to decline” in the 2023-2024 cycle, suggesting that overall investor appetite for risk remains low in the current cycle.
According to the chart below, the ETH/BTC ratio has been trending lower since The Merge, marking a period where Bitcoin outperformed Ethereum, and this scenario is still playing out at the moment.
Ratio ETH/BTC | Source: Glassnode
The report documents several reasons for ETH's underperformance, including the approval of spot Bitcoin ETFs in the United States in January 2024 and increasing competition from other PoS blockchains.
“However, with the launch of Ethereum spot ETFs in the US, this could catalyze a reversal in the current downtrend.”
Real volatility of ETH in 2024 remains lower than previous cycles
Using onchain metrics from market intelligence firm Glassnode, the report analyzed the Market Value to Real Value (MVRV) ratio to gauge overall returns for investors. The MVRV ratio tracks the difference between Market Capitalization and Real Capitalization, describing the average unrealized gain or loss held by the market.
The report notes that while this metric has improved steadily since October 2023, the current value of around 1.8 is still well below the peaks of 6.2 and 3.8 in price increase cycle in 2017 and 2021.
ETH MVRV ratio | Source: Glassnode
For comparison, the report shows that Bitcoin's MVRV ratio is around 2.5, indicating the average BTC investor holds larger unrealized profits than ETH investors.
This means that investors still value BTC more than ETH and they would rather put their money in the crypto king than the altcoin king.
This sentiment is supported by K33 Research, which noted that while ETH echoed BTC's performance throughout the year, with the ETH/BTC ratio trading consistently near a three-year low, the market “undervalued The potential of ETH”.
K33 Research senior analyst Vetle Lunde wrote:
“We believe the market underestimates the Ethereum ETF effect and forecast that the US Ethereum ETF will absorb 1% of the circulating ETH supply.”
Similar to Glassnode and CME Group, Lunde said he expects “the Ethereum ETF effect could lead to outperformance of ETH in the second half of 2024.”
ETH futures trading volume trails Bitcoin
According to a report by Glassnode and CME Group, the futures market remains the main source of trading volume in the digital asset market, generally “five to ten times larger in size than trading volume”. delivered immediately".
Although ETH open interest (OI*) remains high in 2024, reaching an ATH of $17.09 billion on May 29, according to Glassnode data, derivatives trading volume is still significantly lower compared to Bitcoin.
High futures trading volume indicates investor confidence and enthusiasm, which can lead to more buying and higher prices.
The chart below reveals increased trading volume in the futures market since October 2023, with Bitcoin reaching over $34.4 billion in daily contracts traded compared to 26, $7 billion of Ethereum.
“Daily trading volumes at this level are similar to previous market cycles, although they remain below the all-time highs seen in the first half of 2021.”
BTC vs. ETH Futures Trading Volume | Source: Glassnode
Despite ETH's underperformance against Bitcoin, analysts remain optimistic the Ethereum spot ETF will help ETH reach new highs, as some speculate Wall Street will use it to bet on Web3 growth. Others suggest that spot Ethereum ETFs could attract more than $15 billion in the first months, pushing ETH price to $10,000 this cycle.
*OI (open interest) is a measure of the total value of all outstanding or “uncleared” futures contracts on exchanges, and is also an indicator of market price increases as well as like trader sentiment surrounding a particular asset class.
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