Ether-Bitcoin Ratio Drops to Lowest Since April 2021. Here’s Why

• The Ether-Bitcoin ratio slips to a three-year low, extending year-to-date losses to nearly 16%.

• Several factors, such as uncertainty over the launch of the spot ETH ETF in the US and the rise of Ethereum killers like Solana, are responsible for Ether’s underperformance.

The ratio of dollar-denominated prices of Ether {{ETH}} to Bitcoin {{BTC}} continues to decline, extending year-to-date losses as suggested by the bearish deadly cross pattern one month ago.

Just before press time, ETH/BTC fell to 0.04563 on cryptocurrency exchange Binance, hitting its lowest since April 2021, according to charting platform TradingView. This year, the ratio has declined by nearly 16%, indicating a preference for bitcoin or the leading cryptocurrency in terms of market value.

The slide to three-year lows follows reduced demand for ether-linked exchange-traded products (ETPs).

According to Bloomberg data cited by ETC Group in its weekly report, global ether ETPs saw net outflows of around $63.5 million last week, with Hong Kong-listed exchange-traded funds (ETFs) losing moreover. Meanwhile, bitcoin ETPs raked in $92.5 million last week.

Several factors, including competing layer 1s and lingering uncertainty around the debut of ETH spot approvals in the US, are likely responsible for ETH falling out of favor with investors.

“The approval of spot bitcoin ETFs in the US has strengthened bitcoin’s store-of-value narrative and its status as a macroasset. On the other hand, open questions remain about the fundamental positioning of ETH in the cryptocurrency sector. Competing layer-1s (L1s) like Solana detract from Ethereum’s positioning as the “go-to” network for deploying decentralized apps (dApps),’ Coinbase Institutional research analyst David Han said in a note on Wednesday .

Solana’s share of total DEX volume. (DefilLama, Coinbase)

Solana’s share of total decentralized exchange volume increased tenfold, from 2% to 21% in a year, denting Ethereum’s market share.

In January, the US Securities and Exchange Commission (SEC) gave the green light to nearly a dozen BTC spot ETFs. Since then, these funds have attracted about $12 billion in net inflows, according to data source Farside Investors.

The approval of ether-linked spot ETFs will open up a similar pool of capital for Ethereum’s native token, although it is unclear when the SEC will approve it.

Traders on the decentralized betting platform Polymarket only see A 10% chance the SEC will approve a spot ETF by May 31. The regulator has until May 23 to decide whether to approve or reject VanEck’s request to launch a spot ETF on Ethereum. BlackRock’s application deadline is June 23.

The story continues

According to financial lawyer Scott Johnsson, the SEC is seeking reasons to reject ETH ETF applications from BlackRock and others on the grounds that they have been improperly filed as commodity-based fiduciary shares and do not qualify if they hold a title.

Ilan Solot, co-head of digital assets at Marex Solutions, said ether is a “lightning rod” for negative sentiment from native and external crypto players and has several weaknesses.

“Capital is fragmented. There are proportionately more ways to gain exposure to the ecosystem through the numerous Layer 2 tokens (OP, ARB…) and native protocol tokens in each. The capital is being fragmented,” Solot said in an email.

Solot added that strong anti-ETH sentiment on the part of [rival] The Solana community and Bitcoin supporters are driving negative narratives about the ether, and the high-beta cryptocurrency is a “perfect vehicle” for external actors to express a bearish view given that it trades on traditional exchanges like the Chicago Mercantile Exchange.

Finally, Ether recently become inflationaryreversing the bullish and deflationary supply trend seen consistently since its parent network Ethereum transitioned to a proof-of-stake consensus ecosystem in September 2022.

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