The closely watched "relative price strength ratio of Ethereum relative to Bitcoin (ETH/BTC ratio)" fell to its lowest level since April 2021, highlighting the decline in investor demand for Ethereum.
Ethereum’s relative price strength ratio against Bitcoin fell below 0.04 on Sunday and was trading at 0.039 during early European trading on Monday, extending the year-to-date loss to nearly 30%.
Looking back over the past five years, the price ratio of Ethereum to Bitcoin rose from 0.02 to a peak of 0.08 in early 2022, which represented a full threefold increase in the price of Ethereum relative to the price of Bitcoin at the time.
The price ratio has continued to slide since then, with Bitcoin reaching a new high in USD in April this year (although it subsequently fell 20%), but Ethereum has slipped from its new high in 2021 and is down 52% so far. This year, Bitcoin’s return on investment has exceeded 40%, but Ethereum’s investor return has been less than 1%.
Source: TradingView
If this ratio moves higher, it means Ethereum is outperforming Bitcoin; and vice versa. When the ratio rises, traders believe that the market favors Ethereum because betting on the Ethereum ecosystem and risk assets are profitable; conversely, when the ratio falls, it means that people favor Bitcoin and blockchains other than Ethereum.
Some traders said demand for Ethereum over Bitcoin peaked in 2023, but then the growth of spot ETFs favored Bitcoin over others.
FxPro Senior Analyst Alex Kuptsikevich said:
The long-term reason for the rising ratio is active Ethereum developers, either related to the blockchain itself or the growth surrounding the Ethereum ecosystem. However, towards the end of 2023, the trend shifted in favor of Bitcoin as the ETF outlook gained momentum.
"It is worth noting that the launch of the Ethereum ETF did not attract similar buying intentions, resulting in net outflows, nor did it reverse the downward trend in this ratio," he said.
The Ethereum spot ETF has seen net outflows of $580 million since its listing in late July. By comparison, the Bitcoin spot ETF received net inflows of $12 billion in its first 2 months and more than $17 billion in its first eight months.
Some believe that technical aspects and the promise of higher yields offered by other blockchains have also contributed to the lack of demand for Ethereum.
Cryptocurrency market researcher Nick Ruck said:
The Ethereum/Bitcoin price ratio is hitting new lows as the yield on staking Ethereum remains uncompetitive at around 3% per year or less, while staking stablecoins or trading other ecosystem tokens like TON yields high yields .
He said: “With the Bitcoin spot ETF recording its best inflows in the past two weeks on September 13, Bitcoin price remains within its range, which increases Bitcoin’s own attractiveness relative to Ethereum. .
Traders such as Alex Kuptsikevich expect further pain for traders betting on the Ethereum/Bitcoin ratio.
They believe that this ratio may further decline to "0.02 – 0.03" because investors have a positive atmosphere for small coins a few months after the Bitcoin mining reward halving, and generally the beta of altcoins relative to the stock market The value is higher, "Only a sustained rebound can encourage investors to seek higher returns and take more risks by purchasing altcoins."
〈Investors “favor Bitcoin and ignore Ethereum” to the highest level in 3 years! Analysts point out the reasons> This article was first published in "Block Guest".
