Since the historic Merge upgrade on Ethereum over 19 months ago, the data is crystal clear – Ether (ETH) has been struggling to keep up with Bitcoin (BTC). The ETH/BTC price ratio hit a three-year low recently at 0.044, indicating that Ether’s market dominance against Bitcoin has been steadily decreasing. Many Ethereum bulls had high hopes that ETH would outperform Bitcoin following the Merge upgrade in September 2022. The upgrade introduced a proof of stake consensus mechanism and significantly lowered ETH’s inflation rate by 90%. With added transaction fee-burning mechanics, ETH was expected to become a more attractive investment compared to Bitcoin. However, contrary to expectations, ETH/BTC has plummeted by 45% since the Merge upgrade, despite the crypto market being in a general bull trend for the past 18 months.
Joe McCann, the founder of crypto fund Asymmetric, expressed his disappointment by stating that ‘the flippening’ dream, where the market cap of ETH surpasses that of BTC, has turned into a nightmare. McCann compared Bitcoin to ‘ultrasound money’ and Solana to a ‘global supercomputer,’ while pointing out that Ethereum does not fit into either category. Experts at CryptoQuant also highlighted that ETH is no longer considered ‘ultrasound money’ following the Dencun upgrade in March 2024. This upgrade made Ether an inflationary currency once again, undermining its value proposition as a store of value superior to Bitcoin.
Recent technical breakthroughs have enabled developers to bring applications to Bitcoin that were previously exclusive to Ethereum. This includes innovations like Ordinals NFTs, Runes trading, and BitVM, a framework for smart contracts and layer 2 networks in the Bitcoin ecosystem. In just over a year, Bitcoin has become a more popular chain for NFT trading than Ethereum, signaling a shift in preferences among users. Apart from technical concerns, Ethereum faces regulatory hurdles as well. While Bitcoin spot ETF products have been approved, the likelihood of an Ether spot ETF approval remains slim. The U.S. Securities and Exchange Commission has Ethereum and other altcoins in its sights, potentially leading to legal challenges for exchanges and companies dealing with these assets.
Solana (SOL) has seen a remarkable 665% surge in the past year, outperforming ETH, which has experienced a modest 61% increase. Ether’s total market dominance in the crypto space has dwindled to 15.1%, while Bitcoin maintains a dominant position with 54.5%, according to CoinMarketCap. This disparity in growth and market share indicates that Ethereum is facing significant challenges in keeping pace with Bitcoin and other emerging blockchain platforms.
Ethereum’s struggle to maintain relevance and growth in the highly competitive crypto market is evident. Despite promising upgrades and features, ETH has failed to capitalize on its potential to outshine Bitcoin. The dwindling market dominance, regulatory uncertainties, and technical advancements on rival platforms pose significant obstacles for Ethereum’s future trajectory. As investors and stakeholders closely monitor the developments in the crypto space, the fate of Ethereum remains uncertain amidst increasing competition and regulatory scrutiny.
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