Ethereum, the second largest cryptocurrency by market capitalization, has been at its lowest against Bitcoin in over 40 weeks. As IntoTheBlock, a data analytics firm, noted, this is a new trend in the investors’ mindset and their portfolio approach, including institutional investors.
ETH is trading at its lowest level against BTC in over 40 monthsWhile ETF flows for $BTC have been largely positive, $ETH has experienced mostly outflows. This trend suggests institutional investors are favoring Bitcoin’s relative stability over ETH's higher risk, high-reward… pic.twitter.com/Eie6CBZ3c4
— IntoTheBlock (@intotheblock) September 20, 2024
In the past few months, the Exchange-Traded Fund (ETF) flows for BTC have been positive, suggesting a growing confidence in Bitcoin as a stable investment compared to its counterparts. On the other hand, Ethereum has recorded significant outflows, meaning investors are likely to approach with care due to the platform’s higher risk and returns as compared to Bitcoin.
The change in investment flows is illustrated in the recent IntoTheBlock chart that contrasted the market cap distributions of stablecoins, Bitcoin, and Ethereum starting from October 2022. The graph shows the constant decrease in the market share of Ethereum in comparison to Bitcoin, which either maintains the same position or even strengthens.
Implications of Low ETH/BTC Ratio for the Crypto Market
BTC is the first cryptocurrency to appear as independent digital money. In the years that followed, it made a great leap in terms of market capitalization and is now considered the world’s most popular cryptocurrency.
Ethereum was launched in 2015 and went beyond the functionality of BTC by incorporating smart contracts. This has made Ethereum, on which blockchain applications are built through decentralized finance (DeFi), non-fungible tokens (NFTs), and numerous other possibilities. However, Ethereum has been more unpredictable in terms of market cap, and it has shown more fluctuations as compared to Bitcoin.
With institutional money continuing to flow into Bitcoin, it may create more dominance for Bitcoin over other cryptocurrencies, which may impact liquidity and price in the sector. The recent shift may force Ethereum’s stakeholders to come up with measures to restore investors’ trust, for instance, through technology enhancements or new partnership opportunities that might harness the potential of its smart contracts more efficiently.
In this ongoing evolution of the digital currency space, institutional activities will be instrumental in determining the perception and reality of the cryptocurrency markets. For now, Bitcoin is dominating institutional investments as an instrument that is safe in the unpredictable world of cryptos.
