Ethereum has been falling relative to Bitcoin for more than two years. Despite the overall rise in crypto market capitalization, the second-largest cryptocurrency is still lagging behind many competitors in growth this year. Experts RBC Crypto told what has been preventing ether from growing in recent years and whether there is prospects for further strengthening.
On November 26, the Ethereum (ETH) cryptocurrency recorded the most significant increase relative to Bitcoin (BTC) over the day, rising to a value of 0.0366 BTC. Meanwhile, last week, on November 21, this ratio dropped to a three-year low of 0.032 ETH/BTC. The downward trend in this ratio has continued since September 2022, when the ratio was at 0.085 ETH/BTC.
The ETH price as of the end of November 26 was $3.32 thousand, which was the highest level since the end of July 2024. In annual terms, Ethereum price growth lags behind Bitcoin by about 70 percentage points. — since the beginning of January, ETH has grown by 45%, which is one of the lowest figures among the top 10 largest cryptocurrencies by capitalization.
Ethereum showed a downward trend towards Bitcoin after the update of The Merge, which became the largest technical change in the blockchain of the second cryptocurrency, as noted by Rachel Lucas, an analyst at the BTCMarkets crypto platform.
After The Merge, the Ethereum blockchain network stopped working on the Proof-of-work algorithm, as happens in Bitcoin. The update implied that instead of purchasing computing equipment, such as video cards, you need to block at least 32 ETH (about $106 thousand as of November 26) in a special smart contract of the network. Only through such investments can you be able to create new ETH coins, as well as participate in the process of validating user transactions, receiving a commission from them for transactions.
What drives the price
The cryptocurrency market is undergoing significant transformations in 2024, which will significantly affect the cost of Ethereum and Bitcoin. And the key drivers of growth were macroeconomic and political factors, says BitRiver financial analyst Vladislav Antonov.
However, Ethereum faces certain challenges, the expert clarifies. The fall in the ETH to BTC ratio, the emergence of competitors in the form of Solana and BNB Chain, as well as the transition to an inflationary model after changing the consensus mechanism are slowing down its growth (The Merge).
Not everyone is optimistic. Although cryptocurrency market analyst Viktor Pershikov suggests that ETH may continue to rise in price against the backdrop of a general increase in the capitalization of the cryptocurrency market, the asset’s prospects will depend on many factors: “The current growth does not yet indicate that ETH will soon be able to update its absolute maximum.”
According to Pershikov, the recent growth is not related to fundamental indicators, but primarily to significant volumes of liquidations and a reassessment of the positioning of market participants.
Crypto market analyst Stephen Zheng expressed skepticism about the second-largest cryptocurrency by capitalization, noting that Ether finds itself in a difficult situation because it has to simultaneously compete with Bitcoin as a store of value and with Solana as a smart contract platform.
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Source: Cryptocurrency
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