Recent analysis by CryptoQuant indicates that Ethereum is currently in a state of 'extreme undervaluation' relative to Bitcoin due to the decline in the ETH/BTC ratio.
Analysis of Ethereum's Undervaluation
The analysis shows that the current market capitalization of Ethereum compared to its realized capitalization via the ETH/BTC MVRV ratio indicates significant undervaluation. This is the first occurrence since 2019.
Decline in ETH/BTC Ratio
The ETH/BTC ratio has dropped to 0.019, illustrating a drastic reduction from its 2021 highs. This historic decline significantly impacts Ethereum's valuation against the backdrop of Bitcoin's growth.
Impact on Market Dynamics
Ethereum's position poses challenges due to lower network activity. Transaction counts and active addresses have not recovered from their pre-bear market levels, impacting overall market dynamics. Investor sentiment is mixed regarding Ethereum's undervaluation against Bitcoin's rise near $100,000.
While historical data suggests that similar undervaluation conditions have previously led to Ethereum's outperformance, current headwinds such as reduced fee generation following the Dencun upgrade create uncertainties around its near-term recovery.
