Investors are losing their faith in Ethereum as the cryptocurrency continuously fails to keep pace with Bitcoin’s outsized gains.
And things could get worse for the world’s biggest altcoin.
Not only have the odds for a US spot Ethereum exchange-traded fund getting approved in May dropped, but Ethereum exchange-traded products suffered $34 million worth of outflows this past week, CoinShares data shows — making them the only asset group among those CoinShares tracks to register a net outflow since the start of the year.
“ETH sentiment is anecdotally at the lowest it has been in years, despite recent developments such as the BUIDL fund by BlackRock,” Luke Nolan, a research associate at CoinShares, told DL News.
The decreasing optimism comes as smaller altcoins, like Solana, have attracted investors who don’t expect Ethereum investments to yield as high returns as they did in the past.
A Bitcoin-driven market
In previous bull markets, Bitcoin has outperformed other cryptocurrencies at the beginning of the cycle — a trend that looks to be playing out again.
This time the focus on Bitcoin has been catalysed by inflows to the 10 US Bitcoin ETFs that launched on January 11.
They have so far seen over $12 billion in inflows, according to data from Farside Investors.
Yet, Ethereum has not managed to capitalise on the rally.
Ethereum’s price in Bitcoin — or ETHBTC — fell to a low of 0.046 in April, creating the biggest price gap between the two assets in almost three years.
That means that since ETHBTC peaked in 2022, an investment in Bitcoin has outperformed Ethereum by 44%.
The ETHBTC trading pair shows the price of Ethereum divided by the price of Bitcoin. Traders use this metric to gauge the relative strength of Ethereum against benchmark cryptocurrency Bitcoin.
“Even though some people may not view ETH as an altcoin per se, its over- or underperformance relative to Bitcoin is a powerful metric to try and understand what kind of market we are in,” Nolan said.
If the Bitcoin ETFs continue to steam ahead, the price gap between Bitcoin and Ethereum may become more pronounced.
And there’s reason to believe that Bitcoin ETF inflows will continue to soar. Hong Kong recently approved the launch of Bitcoin ETFs, which are set to begin trading April 30.
Ethereum ETF approval looks unlikely
While Hong Kong also approved a spot Ethereum ETF, the odds of US regulators approving similar funds on May 23 — the deadline for when they have to either approve or reject VanEck’s application — are low.
Bloomberg Intelligence analysts James Seyffart and Eric Balchunas put odds for a May approval at around 25%.
Similarly, punters on blockchain-based betting platform Polymarket put the odds of an approval at 13%.
This week, BlackRock amended its spot Ethereum ETF application while competitor Grayscale filed to convert its futures Ethereum ETF to a spot fund.
Despite this, analysts remain sceptical that any US spot Ethereum ETF will be approved.
“The ETH ETF is almost certainly going to be rejected in May, which has dampened flows into ETH in already existing [exchange-traded] products,” Nolan said.
Solana steals the spotlight
Among so-called altcoins, Ethereum is the largest, with a market value of $384 billion. But this success is a double-edged sword, according to Nolan.
“ETH has a large market cap and investors have turned to lower cap alternatives,” Nolan said.
One popular alternative is Solana.
Most traders assume it would be difficult for Ethereum’s market value to exceed that of Bitcoin. So with Bitcoin sporting a market value of $1.27 trillion, Ethereum traders see limited upside potential.
Despite rallying 546% over the past year, Solana’s market cap is a comparatively low $64 billion, leaving more room for it to grow.
Traders are also starting to pay more attention to Solana’s price compared with other cryptocurrencies.
“I have noticed much more attention this cycle vs. last cycle to SOL/ETH and SOL/BTC pairs,” Nolan said.
Signs of hope
There’s still hope Ethereum could stop bleeding against Bitcoin — but not for a while.
The approval of a spot Ethereum ETF should help drive interest. Nolan said he expects an ETF will “likely” be approved in 2025.
Additionally, if the current bull market repeats previous ones, Ethereum should do better as time goes on.
Until then, traders will continue to watch the ETHBTC chart closely for clues as to where the top two cryptocurrencies are heading next.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
