Despite its relentless push towards innovation and a multitude of upgrades, Ethereum’s price continues to fall significantly short of its primary competitor, Bitcoin. According to recent reports, Ethereum’s value against Bitcoin has witnessed a shocking 77% crash. This downturn, according to Santiment, a leading on-chain analytics platform, can be attributed to a series of technical, macro, and sentiment-driven factors.
On April 11, Santiment published an in-depth report on Ethereum, elucidating its nearly four-year underperformance and the causes behind it. Once considered the most likely cryptocurrency to usurp Bitcoin’s throne, Ethereum has recently experienced a severe price drop when compared directly with Bitcoin.
Santiment’s on-chain data reveals that Ethereum’s value has plummeted by approximately 77% relative to Bitcoin since December 2021. While the dollar value of Ethereum has not entirely deteriorated, especially when compared to other alternative coins, the long-term BTC/ETH ratio presents a grim outlook for Ethereum holders.
In stark contrast, Bitcoin has surged ahead, reasserting its market dominance and consistently outpacing Ethereum across multiple timeframes. This uneven performance has provoked traders and former maximalists to derogatorily label Ethereum as a “shitcoin.” Adding insult to injury, numerous mid to low-cap altcoins have already surpassed Ethereum in terms of short, mid, and long-term performance, leading to further discredit for the world’s second-largest cryptocurrency by market capitalization.
Beyond the price action and market volatility, Santiment’s report also reveals a set of fundamental reasons for Ethereum’s lackluster performance over the years. Critics have pointed out various technical, sentimental, and regulatory issues.
Interestingly, Ethereum’s Layer 2 solutions, designed to enhance its performance, are ironically one of the primary contributors to its underperformance. Layer 2 solutions such as Arbitrum, Optimism, and zkSync are allegedly siphoning off activity from the mainnet, diverting investments away from Ethereum.
Ethereum’s complex roadmaps and communication issues have also contributed to investor confusion. Major updates, like The Merge and Shanghai, have been challenging for investors to understand, making Ethereum seem less user-friendly than Bitcoin.
High gas fees and slow rollout of vital upgrades have led to user frustration, propelling them towards more affordable and quicker alternatives, thereby reducing adoption. Regulatory concerns also continue to plague Ethereum, given its uncertain legal standing, unlike Bitcoin, which enjoys a more established legal precedent.
Furthermore, Ethereum’s investment appeal seems to be waning. Whereas Bitcoin is seen as a stable digital gold, Ethereum appears to be caught in limbo, lacking a clear and attractive investment narrative. The emergence of newer blockchains like Solana and Cardano, offering cheaper and faster solutions, is also drawing users and investments away from Ethereum.
The final factor behind Ethereum’s long-term price decline, according to Santiment, is the increasing selling pressure. The withdrawal of staked ETHs post-upgrade has led to consistent sell-side pressure, inhibiting growth and momentum compared to Bitcoin.
In conclusion, Ethereum’s struggle against Bitcoin seems to be a multi-faceted issue, involving technical, sentimental, and regulatory challenges. As Ethereum continues to navigate through these hurdles, the market will watch with bated breath to see how this second-largest cryptocurrency will respond.
