Ethereum [ETH] has been underperforming since April, especially compared to Bitcoin [BTC]. As the leader of the altcoin market, some participants expected ETH to lead the altcoin rally. However, the current situation shows that altcoins are struggling to catch up with the market.
Source: ETH/BTC on TradingView
The ETH/BTC chart has been in a clear downtrend since April 2023. Until April 2024, the June 2022 low at 0.049 held, but the persistent downtrend over the past six months has brought ETH/BTC to an all-time low since April 2021.
Reasons for Ethereum's loss of value
Long-term ETH investors will be concerned about Ethereum losing ground against Bitcoin at a rapid pace. One of the reasons for the token's loss of value is the inflation that has been present in the network since the Dencun upgrade in March 2024.
Source: YCharts
The Dencun upgrade introduced EIP 4844, which significantly reduced the transaction costs of L2 transactions. While this is good news for users, the reduction in network fees means that less ETH is burned, causing the token to become slightly inflated over the past six months.
This is shown by the increasing ETH supply chart.
Optimism activity surges
Source: Santiment
Arbitrum [ARB] and Polygon Ecosystem Token [POL] saw an increase in transaction volume, but Optimism [OP] was the clear leader. This indicates that L2s are growing in popularity.
In particular, Optimism outperforming the rest can be explained by the increase of Coinbase’s Base L2 on the Optimism Superchain.
An inflated ETH and its performance against Bitcoin challenge the idea that Ethereum is a currency. Increased activity could alleviate this issue, but the market's lack of confidence in ETH can be clearly illustrated by the ETH/BTC chart.
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