Ethereum has declined 44% against bitcoin since the transition to PoS. Why has Ethereum significantly underperformed Bitcoin since Merge was activated and the full transition to the Proof-of-Stake consensus algorithm?
First, there is weaker activity on the Ethereum network compared to bitcoin. Total transaction fees on Ethereum continue to decrease, and the number of transactions relative to BTC has fallen to the lowest levels in recent years.
Second, the dynamic of Ethereum supply is unfavorable for the price. The total supply of ETH has been steadily increasing since the beginning of April 2023, reaching its highest since May 2023.
Third, traders and investors have recently favored Bitcoin. This is evidenced by the decrease in the relative volume of spot trading of ETH compared to BTC.
The situation was influenced by technical changes in the Ethereum network. For example, the reduction in transaction fees following the Dencun upgrade could have exerted a negative impact on the network's economy.
Also, Ethereum is prevented from closing the gap with BTC due to:
- Competition from other blockchain platforms
- Regulatory challenges
- Technical difficulties in implementing future upgrades
Finally, market factors play a role. ETH continued to lag BTC even after the approval of Ethereum spot ETFs stateside, and the current ETH/BTC price ratio is at its lowest since April 2021.