The cryptocurrency market has been under intense bearish pressure in recent weeks, with several large-cap assets, including Bitcoin (BTC) and Ethereum (ETH), struggling to make positive moves. The past week was particularly bleak for the two largest cryptocurrencies, as they posted double-digit losses over the past seven days.

While BTC’s price performance has cooled over the last two quarters of 2024, the flagship cryptocurrency continues to outpace Ethereum in terms of market action. While some of this can be attributed to ETH’s disappointing performance in recent weeks, a blockchain analytics firm has offered insight into the dynamics between Bitcoin and Ethereum.

Here’s Why Bitcoin Is Outperforming Ethereum: CryptoQuant

In its latest report, CryptoQuant discussed Ethereum’s performance compared to Bitcoin in recent years. According to the platform’s data, Ethereum has underperformed Bitcoin by 44% since The Merge, the 2022 event that saw Ethereum (formerly a Proof-of-Work blockchain) transition to a Proof-of-Stake (PoS) network.

At the time of writing this text, data from TradingView shows the ETH/BTC price at around $0.04122, the lowest level since April 2021. The disappointing performance of ETH against BTC continues despite the recent launch of spot Ethereum ETFs in the United States. In fact, the ETH/BTC pair is down 18% since the funds were approved.

Source: CryptoQuant

According to CryptoQuant, Ethereum’s sluggish performance relative to Bitcoin may be related to its relatively weaker network activity. For example, Ethereum’s total network transaction fees have been steadily sinking following the Dencun update. Meanwhile, the relative number of transactions has fallen to a multi-year low of 11.

In addition, the supply dynamics have not been particularly favorable for Ethereum compared to Bitcoin. CryptoQuant emphasized that the total supply of Ether has been steadily increasing since early April, shortly after the Dencun update. Coincidentally, Bitcoin completed its fourth halving in April, with miner rewards dropping from 12.5 BTC to 6.25 BTC.

Moreover, investors have shown a preference for Bitcoin over Ethereum. This is confirmed by the decline in the relative spot trading volume of ETH to BTC, which has fallen from 1.6 (i.e. the former’s spot trading volume was 1.6 times greater than the latter’s) to 0.76 over the past week.

What’s next?

Interestingly, CryptoQuant believes that Ethereum could continue to underperform Bitcoin, especially since it is still trading above an undervalued zone. According to the analytics firm, ETH/BTC would need to fall at least 50% from its current level to reach the undervalued zone. At the time of writing, Bitcoin is trading at around $53,700, while Ethereum is trading at $2,213, according to CoinGecko Data.

ETH struggles against BTC on the daily timeframe | Source: ETHBTC chart from TradingView

Featured image from iStock, chart from TradingView