Key Points
- Ethereum’s valuation relative to Bitcoin has dropped to a four-year low, causing market concerns.
- Bitwise’s CIO, Matt Hougan, remains confident about Ethereum’s potential for a price reversal.
Ethereum’s relative valuation to Bitcoin has caused market unease as the ETH/BTC pair fell below 0.04 for the first time in nearly four years. This pair measures Ethereum’s value in relation to Bitcoin, and its multi-year decline signifies the altcoin’s underperformance.
Ethereum’s Performance and Future Prospects
Interestingly, Ethereum has lost its yearly gains, while Bitcoin is up by 40%. Furthermore, Solana, Ethereum’s main competitor, has seen an 18% increase year-to-date.
Despite this, digital asset manager Bitwise remains optimistic about Ethereum’s future. Bitwise’s CIO, Matt Hougan, believes that Ethereum could recover after the U.S. elections.
In a note to investors, Hougan stated, “I think people are too quick to look past Ethereum and the real-world success we’re already seeing in its ecosystem.” He mentioned the prediction site Polymarket, the substantial stablecoin, and the DeFi space as major bullish indicators for the altcoin. Moreover, the growing institutional interest from firms like BlackRock could also boost Ethereum’s value.
According to Hougan, additional regulatory clarity on the DeFi space, particularly after the U.S. elections, could further elevate the altcoin’s value.
Ethereum’s Current Challenges
Several reasons have been posited for Ethereum’s underperformance compared to Bitcoin. David Duong, Coinbase’s Head of Institutional Research, attributes most of the muted price to the market structure, typically characterized by slow activity during the summer.
Moreover, the disappointing performance of U.S. spot Ethereum ETFs has been identified as a factor for weak Ethereum sentiment. Unlike its Bitcoin ETFs, Ethereum products have seen net negative flows of $606 million since their launch in July.
Hougan also cites regulatory uncertainty as a significant factor impacting Ethereum, especially with the upcoming U.S. elections and the lack of a clear presidential frontrunner. He also mentioned the community’s concern over Ethereum’s tokenomics as contributing to its current challenges.
For context, Ethereum’s revenue has dropped to a four-year low after scaling allowed L2s to attract most of the volume from the L1 base layer, causing concerns among users.
Meanwhile, the ETH/BTC pair is on the brink of falling below its multi-year descending channel. However, market analyst Benjamin Cowen predicts that ETH/BTC could bottom out by the end of the year. At present, Ethereum is valued at $2.3K, a 43% drop from its March highs of $4K.
