While investors wait for the spot ETH ETF to start trading, Ethereum prices have underperformed BTC on multiple metrics.
While it started the year strong, it has gradually weakened since mid-March. Although expectations of Ethereum spot ETF approval in the United States picked up in mid-May, it still underperforms Bitcoin, with ETH up about 60% in the past 12 months, while BTC has risen 87% in USD pairs.
The New Digital Assets: Insights and Market Trends report jointly released by CME Group and Glassnode reveals some of the reasons for ETH's poor performance throughout 2024, as described below.
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Ethereum continues to fall against BTC 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.
Zooming out, Ethereum has experienced relatively deeper corrections than Bitcoin, with the largest retracement so far in the 2022-24 cycle being -42%. Previous cycles saw corrections of more than -65% both early and late in the macro bull market.
The Glassnode-CME Group report also noted that “the ETH/BTC ratio continues to decline” in the 2023-24 cycle, indicating that overall 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.
The report documents multiple reasons for Ethereum’s underperformance, including the approval of a spot Bitcoin ETF in the United States 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 2024 realized volatility still lower than previous cycles
The report uses on-chain metrics from market intelligence firm Glassnode to analyze the market value to realized value (MVRV) ratio to measure overall profitability for investors. The MVRV ratio tracks the difference between market capitalization and realized cap and describes the average unrealized profit or loss held by the market.
The report noted that although the indicator has steadily improved since October 2023, the current value of about 1.8 is still far below the peaks of 6.2 and 3.8 during the 2017 and 2021 bull cycles.
In comparison, the report shows that Bitcoin’s MVRV ratio is around 2.5, indicating that BTC investors are, on average, holding larger unrealized profits than ETH investors.
This means that investors still value BTC higher than ETH and they would rather put their money into the pioneer cryptocurrency than Ethereum.
This sentiment is shared by K33 Research, who noted that while ETH’s performance has been consistent with BTC’s throughout the year and the ETH/BTC ratio is stubbornly trading around 3-year lows, the market is “underestimating ETH’s potential.”
Vetle Lunde, senior analyst at K33 Research, wrote,
“We believe the market underestimates the impact of an ETH ETF and forecast that a US ETH ETF would 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 outperformance 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, typically “five to ten times the size of spot trading volume.”
Although Ethereum’s open interest remains high in 2024, reaching an all-time high of $17.09 billion on May 29 according to Glassnode data, 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 trading over $34.4 billion in daily contracts and Ethereum trading $26.7 billion in daily contracts.
“Daily volumes of this magnitude are similar to previous market cycles, although still below all-time highs seen in the first half of 2021.”
Despite Ethereum’s underperformance relative to Bitcoin, analysts are optimistic that a spot Ethereum ETF will take ETH to new highs as some speculate that Wall Street will use it to bet on the growth of Web3. Others speculate that a spot Ethereum ETF could attract more than $15 billion in its first few months, pushing ETH prices to $10,000.
