Ethereum's Falling Performance: Declining On-Chain Activity and Doubts Over May's ETF Approval
Summary:
The news discusses Ether's (ETH) underperformance against Bitcoin (BTC) stating three primary reasons: decreased network activity, declining sentiment regarding the approval of spot Ethereum Exchange-Traded Funds (ETFs) in May, and new all-time high prices. This is compared to increased investments in Bitcoin and its upcoming supply halving, which are boosting its performance. Ethereum's on-chain activity decreased over the last month, while Solana has captured a share of on-chain activity. The decreasing possibility of spot Ether ETF acceptance in May is also bringing a bearish momentum to Ethereum.
Since the start of this year, Ether (ETH) has been fluctuating in value, showing some loss of steam around mid-March. Although ETH has appreciated approximately 48% from the first day of January onwards, it still falls short when compared to Bitcoin's approximately 57% rise over the same timeframe.
Three primary factors have resulted in ETH's recent underperformance versus Bitcoin. These include a decrease in the amount of activity on the network and a drop in optimism regarding the acceptance of spot Ethereum ETFs this May.
In terms of performance against Bitcoin over the past 30 days, ETH has decreased by 13.5%. This shows underperformance compared not just to Bitcoin, but also to other top tier 1 tokens. For instance, the price of Bitcoin has only reduced by 4% over the last 30 days, while other top tier 1 tokens like BNB and SOL have seen an increase of 15.5% and 16% respectively during the same period.
Certain additional factors have led to Ether's underperformance against Bitcoin over the past month. These include new record high prices, more than $10 billion of investment in the spot BTC ETF, and a surge in Bitcoin Ordinals trading volume nearing $3 billion. The forthcoming Bitcoin supply cut, which has usually kicked off a cryptocurrency market bull run in the past, is providing additional boost to Bitcoin.
A fading activity on Ethereum's network - including on its scaling solutions - may offer additional explanation for why ETH has been lagging behind Bitcoin. Ethereum's decentralized applications (DApps), a critical component of this layer 1 blockchain, have been reducing in usage, suggesting reduced demand for ETH.
Data from DappRadar indicates that the leading Ethereum DApps have experienced a decrease of 6.42% on average in the count of active addresses over the past 30 days. Further data from Coinglass has shown a downfall in Ethereum's on-chain activity over the last 30 days.
Although Ethereum remains the topmost network in the DeFi sector, Solana has begun to claim its share in this area in terms of on-chain activity driven by the memecoin craze and stablecoin transfer volume.
Another factor causing ETH's dull performance and lack of strength against Bitcoin is the declining chances of an Ethereum ETF being approved by May. According to VanEck's CEO Jan van Eck, it's unlikely that the Ethereum ETF application from the multibillion-dollar investment company will be approved.
VanEck and Cathie Wood’s ARK Invest were the first wealth management firms submitting their application for an Ethereum ETF in the U.S., and are currently awaiting a final decision by the SEC, expected to be delivered on May 23 and May 24.
Despite the lack of communication from the SEC on Ether ETF approvals, both VanEck and financial analyst Eric Blachunas have voiced their concerns, bringing the overall outlook into a more pessimistic light.
This news article doesn't provide investment or trading advice. Investing and trading involve risks, and readers should perform their own research prior to making any financial decisions.
Published At
4/11/2024 10:19:46 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.