The recent downturn of Ethereum (ETH) and the contrasting rise of Bitcoin (BTC) since the implementation of the Merge has become a hot topic in the crypto world. Since the Merge in September 2022, ETH has seen a nearly 70% drop against BTC, casting a shadow over Ethereum’s market position and raising doubts about its future price trajectory.
Originally, Ethereum’s transition to a proof-of-stake (PoS) consensus mechanism was expected to revolutionize its network by enhancing energy efficiency and transforming ETH into a “deflationary” asset through supply reduction. Some even predicted that Ethereum would surpass Bitcoin’s market capitalization.
However, the reality has unfolded differently. Bitcoin has surged approximately 160% against Ether since the Merge. Ethereum’s supply growth rate is currently around 0% according to UltraSound.Money, indicating that the Merge’s expected deflationary impact has not materialized as anticipated.
Ethereum’s deflationary strategy largely depends on EIP-1559, which destroys a portion of the transaction fees. However, as onchain activity lessens and gas fees fall, fewer ETH are burned. This trend is evident in data from Token Terminal, which shows Ethereum’s average transaction fee peaked above $15 in March 2024 and then plummeted below $5 by April.
On-chain data suggests that Ethereum’s long-term holders have been offloading their holdings since the Merge. Wallets with 100,000 ETH or more have significantly reduced their holdings, while addresses with 1 million ETH have also seen a decrease. This could be an indication that major holders are losing faith in Ethereum’s long-term prospects.
In the meantime, Bitcoin’s market share has been growing, along with that of Solana (SOL) and other emerging crypto ecosystems. Solana, in particular, has become a formidable competitor for Ethereum, attracting DeFi and NFT projects that might have otherwise chosen Ethereum. It now holds nearly half of the DEX market.
While Ethereum’s recent performance is viewed by some as a regular market cycle occurrence, others see it as an indication that ETH is losing ground against BTC each time the latter crosses the $100,000 mark.
Whether Ethereum can recover from its current slump remains to be seen. According to its weekly chart, ETH/BTC is in oversold territory based on the Relative Strength Index (RSI). However, Ethereum’s long-term bearish trend is still in place, which could lead to further declines if a decisive close below the 0.024-0.023 BTC range occurs.
This article does not offer investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
