Market research firm Steno Research said in a report on Thursday that Ethereum (ETH)'s recent underperformance may be over and it is ready to shine again, both in terms of price growth in fiat currency and relative to Bitcoin ( BTC).
The price of Ethereum once rose from US$2,280 at the beginning of the year to US$4,090, but has fallen back to between US$2,100 and US$2,800 in the past six months, with a year-to-date increase of approximately 11%. Bitcoin prices have increased by 50% this year, reaching a peak of 74%. The ETH/BTC ratio continues to fall after the Ethereum merger and upgrade in 2022, with a drop of more than 50%.
ETH/BTC ratio trends since 2020 (Source: Steno Research)
Steno Research’s report points out that Ethereum’s performance during the last bull run can provide some guidance. Ethereum surged during the then-altcoin season, more than doubling its value compared to Bitcoin in less than two months. The report states that this shift has been triggered by a surge in on-chain activity, including decentralized finance (DeFi), stablecoin issuance, and the boom in NFTs, which mainly occur on the Ethereum blockchain.
Steno said that the U.S. Federal Reserve’s interest rate cut earlier this week will lead to an increase in on-chain activity, which will greatly benefit Ethereum. The research house also believes that Bitcoin exchange-traded funds (ETFs) are unlikely to continue to outperform Ethereum ETFs, noting that Ethereum has demonstrated the ability to suddenly outperform Bitcoin in the past.
There are three main reasons why Bitcoin has outperformed Ethereum recently, writes Steno senior cryptocurrency analyst Mads Eberhardt:
"The impact of U.S. spot ETFs on Bitcoin and Ethereum, continued buying pressure from MicroStrategy, and the significant decline in Ethereum trading revenue in recent months."
“Ethereum’s active addresses remain strong, especially when considering the increasing adoption of rollups,” Eberhardt said, adding that the network’s transaction revenue looked to have bottomed out in August.
Eberhardt wrote on the social platform: "Lower interest rates -> more on-chain activity -> higher Ethereum transaction revenue -> lower ETH supply growth -> higher ETH price."
Lower interest rates -> More onchain activity -> Greater Ethereum transactional revenue -> Lower ETH supply growth -> Higher ETH price.Let's go. pic.twitter.com/rr0o0WjJol
— Mads Eberhardt (@MadsEberhardt) September 19, 2024
Asset management firm Bitwise is also optimistic about Ethereum’s prospects. "Ethereum looks to be a potential contrarian investment opportunity towards the end of the year," the firm said in a report on Tuesday.
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