Ethereum (ETH) has experienced a significant decline against Bitcoin (BTC), reaching its lowest point since January 2020. The ETH/BTC trading pair has fallen to 0.019, marking an over 80% drop from its December 2021 peak. This downturn is accompanied by a decrease in Ethereum’s market capitalization dominance, which has plummeted by 67% from its 2021 highs, nearing levels observed in 2022.
The downward trend began in September 2022 following Ethereum’s transition to a proof-of-stake consensus mechanism, known as The Merge. This upgrade aimed to enhance scalability, efficiency, and sustainability, positioning Ethereum alongside networks like Solana (SOL) and Avalanche (AVAX). Despite these improvements, Ethereum has encountered several challenges. Notably, spot Ethereum Exchange-Traded Funds (ETFs) have garnered limited interest on Wall Street, with cumulative inflows totaling under $2.6 billion. In contrast, Ethereum investment funds collectively hold approximately $4.9 billion in assets, suggesting that many investors continue to favor Bitcoin as a store of value.
Furthermore, Ethereum faces increasing competition from its own layer-2 solutions, including Base, Arbitrum, Polygon, and Optimism. According to DeFi Llama, decentralized exchanges (DEXs) built on Ethereum processed $57.9 billion in volume over the past 30 days, while layer-2 networks handled over $35 billion during the same period. Additionally, Ethereum’s fee revenue has lagged behind competitors such as Tron, Solana, and Jito, indicating a decline in profitability.
Technical analysis reveals that Ethereum has formed an inverse cup and handle pattern, a bearish continuation signal. The Average Directional Index (ADX) has risen to 44, suggesting that the current downtrend is gaining momentum. Based on the depth of the cup formation, projections indicate that ETH could fall to an ETH/BTC pair value of 0.0025, approaching its all-time low.
In summary, Ethereum’s recent performance against Bitcoin highlights ongoing challenges, including limited ETF interest, increased competition from layer-2 networks, and declining fee revenues. Technical indicators point to the possibility of further declines, underscoring the importance for investors to monitor these developments closely.
