The Ethereum
$1,968 to Bitcoin
$99,333 (ETH/BTC) ratio continues to witness a significant decline according to CryptoQuant data, signaling a move into a multi-year low territory. Back in 2021, this ratio stood around 0.08, but it has currently dropped to the level of 0.019. Investors are cautious and do not perceive this decline as a marker for recovery, mainly due to the concerns stemming from decreased network activity and reduced interest from institutional investors.
The Driving Factors Behind the Sharp Decline
The ETH/BTC ratio, which was around 0.08 at the end of 2021, has now dropped to 0.019. This marks a loss exceeding 75%. CryptoQuant’s MVRV (Market Value to Realized Value) metric highlights a significant gap between market value and realized value, pointing to a multi-year low point. Although historical data indicate that similar declines have sometimes preceded recoveries, there are currently no clear signs of a reversal.
Investors recall the times when ETH remained strong against Bitcoin over the long term. Nevertheless, the pronounced drop in MVRV underscores a wariness within the crypto market’s psychology. The persistent low levels in the ratio ignite debates over whether it heralds a bull run or signals continued pressure. Experts recommend evaluating this situation alongside other metrics. Analysts also closely monitor Ethereum’s correlation with different asset classes.
Sluggishness in the Ethereum Network and Institutional Demand
In March 2024, Ethereum’s Dencun update brought substantial reductions in transaction fees and accelerated coin burning rates. Although transaction fees have significantly diminished, coin burning activity has virtually ceased. The increase in total supply has complicated the network’s value production dynamics. Meanwhile, Layer 2 solutions like Arbitrum and Base have alleviated traffic on the mainnet. Consequently, many users have leaned towards alternative networks expecting faster transactions.
Institutional investors have also decreased their Ethereum holdings. Staking volumes have fallen, and so have ETH balances in ETFs and funds. CryptoQuant suggests that this decline in fund holding reflects diminished market confidence. On the flip side, Bitcoin maintains its status as a safe haven amid uncertainty, edging closer to the $100,000 mark. Fund managers are reassessing their portfolio diversification strategies.
