Ether (ETH) Continues to Trend Lower Against Bitcoin (BTC) in 2024

A new Digital Assets: Insights and Market Trends report reveals some of the reasons why ETH has been underperforming BTC throughout 2024.

After starting the year on a strong note, the price of Ether (ETH) began tapering off in mid-March. Although ETH picked up momentum in mid-May amid anticipation of the approval of spot Ethereum ETFs in the United States, it has underperformed Bitcoin (BTC) throughout 2024.

ETH price started the year around $3,100 and surged as high as $3,180 on March 8. However, the rally fizzled out, and ETH prices slid to a yearly low of $2,180 on May 1, a 31% drawdown from the local top.

In comparison, BTC prices began 2024 around $52,000 and reached a yearly high of $64,600 on March 28. After a 23% drawdown, BTC prices reached a low of $49,800 on May 11.

Zooming out, the drawdown profile of ETH experienced relatively deeper corrections compared to Bitcoin, with the largest drawdown in the 2022–24 cycle being –42% thus far. Previous cycles have seen deeper corrections, exceeding 65% during both the early and later phases of macro bull markets.

A new Digital Assets: Insights and Market Trends report, a joint publication from CME Group and Glassnode, reveals some of the reasons why ETH has been underperforming BTC throughout 2024, as discussed below:

The approval of spot Bitcoin ETFs in the United States in January 2024 led to increased attention and capital flows toward BTC, leaving less enthusiasm for other digital assets like ETH.

The increasing competition from other proof-of-work blockchains, such as Solana (SOL), Polygon (MATIC) and Avalanche (AVAX), has also contributed to the relative underperformance of ETH.

The Glassnode-CME Group report also noted that the “ETH/BTC ratio has continued to decline” during the 2023–24 cycle, suggesting that the general investor risk appetite is still low for the current cycle.

According to the chart below, the ETH/BTC ratio has trended lower since the Merge, marking a period where Bitcoin outperforms Ethereum, a scenario that is still playing out at the moment.

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ETH Realized volatility in 2024 remains below previous cycles’

Using onchain metrics from market intelligence firm Glassnode, the report analyzed the Market Value Realized Value (MVRV) ratio to gauge the overall profitability of investors. The MVRV ratio tracks the divergence between the Market Cap and the Realized Cap and describes the average unrealized profit or loss held by the market.

The report noted that although this metric has improved steadily since October 2023, its current value of around 1.8 is still way below the 6.2 and 3.8 peaks witnessed during the 2017 and 2021 bull cycles.

In comparison, the report shows Bitcoin’s MVRV ratio at around 2.5, indicating that the average BTC investor holds larger unrealized profits than ETH investors.

This means that the investors still value BTC higher than ETH and that they would rather put their money in the pioneer cryptocurrency than in Ether.

This sentiment is shared by K33 Research, who noted that although ETH has mirrored BTC's performance throughout the year, with the ETH/BTC ratio stubbornly trading near 3-year lows, the market has “under-appreciated Ether's potential.”

K33 Research Senior analyst Vetle Lunde wrote:

“While the approval of spot Bitcoin ETFs in the first half of 2024 has supported BTC's outperformance, we expect the ETH ETF effect could lead to ETH outperformance in H2 2024.”

Related: BTC price risks ‘double top’ — 5 things to know in Bitcoin this week

ETH futures trade volumes trail Bitcoin's

According to the Glassnode and CME Group report, futures markets remain the primary source of trade volume in digital asset markets, generally being “five times to ten times larger in size than spot trading volumes.”

Although Ether’s open interest remains high in 2024, reaching an all-time high of $17.09 billion on May 29, as per Glassnode data, the derivatives trading volumes still remain significantly lower than those of Bitcoin.

High futures trading volumes indicate high investor confidence and enthusiasm, which could lead to more buying and higher prices.

The chart below reveals that trade volumes in futures markets have picked up since October 2023, with Bitcoin seeing over $34.4 billion in daily contracts traded against Ethereum’

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