Since the Merge two years ago, Ethereum's performance relative to Bitcoin has significantly declined. Let's analyze the main factors of this underperformance and the possible future of the cryptocurrency.
Transition and Current Metrics
On September 15, 2022, Ethereum transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism. Since this transition, the native ETH token has underperformed BTC by 44%. This trend continues despite the approval of spot ETFs for Ethereum, unlike Bitcoin, which surged after a similar move.
Impact of Network Activity
Data indicates that cryptocurrency investors prefer Bitcoin, as seen in the decline of ETH's spot trading volume relative to BTC. CryptoQuant analysts cite weaker network activity in Ethereum as one of the reasons for its underperformance. Total transaction fees on the Ethereum network have continued to decrease since the Dencun upgrade, which introduced new data blobs to the blocks in March.
Potential Further Decline
One effect of the Dencun upgrade is that the ETH supply has become inflationary due to a reduced burn rate. Furthermore, Ethereum lags behind Bitcoin in transaction count. Analysts suggest that ETH could continue to decline relative to BTC as Ethereum has not yet reached the undervaluation level.
At present, Ethereum continues to lag behind Bitcoin in many parameters. Experts believe that the future trend will depend on various factors, including network activity and economic conditions.
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