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Nearly two years after “The Merge” at Ethereum’s blockchain — the transition to a proof-of-stake consensus mechanism from a proof-of-work setting — investors in ETH who hoped the pivotal upgrade would provide a financial lift have been left with shrinking returns on investment. Ether’s price has underperformed Bitcoin (BTC), BNB, and even Solana (SOL) since the September 15, 2022 merge day.
The Floppening
Ethereum started 2024 on a high note but started flatlining in mid-March. While the second-largest crypto picked up momentum in mid-May amid anticipation of the approval of U.S. spot-based ETH exchange-traded funds (ETFs), it has underperformed Bitcoin by a notable 44% since the blockchain’s switch to the PoS setup.
“Next week will mark two years since Ethereum switched to a proof-of-stake network, an upgrade known as The Merge. Since then, Ethereum has underperformed Bitcoin by 44%,” wrote CryptoQuant experts in a Thursday report.
CryptoQuant noted that the ETH/BTC price currently hovers around 0.0425, the lowest level since April 2021. Notably, Ether has underperformed the benchmark crypto even after spot ETH ETFs made their debut on U.S. exchanges on July 23.
The experts predicted that Ether could drop a further 50% against Bitcoin before bottoming out:
“Ethereum could fall further with respect to Bitcoin as Ether is still above undervaluation territory. We estimate that Ether would need to fall to about 0.02 in terms of Bitcoin, a 50% decline, for it to enter undervaluation territory.”
According to analysts, Bitcoin is not the only crypto Ethereum has trailed since The Merge.
“Ethereum has also underperformed altcoins like Solana and BNB since ‘The Merge’, down 53% and 18% respectively,” CryptoQuant’s Head of Research Julio Moreno postulated.
Is The Flippening Dream Over?
Many Ethereum fans have been ardently clamoring for the “Flippening,” but with the current trends, it seems that dream might be slowly slipping away.
CryptoQuant posited that a key reason for the underperformance could be Ethereum’s transaction count in the Mainnet relative to Bitcoin’s falling to one of the lowest levels since July 2020. Additionally, Ether’s total supply has been expanding since the execution of the Dencun upgrade in April and is no longer deflationary.
“Ethereum underperformance seems to be correlated with weaker network activity dynamics compared to Bitcoin,” CryptoQuant analysts said.
Another reason cited is the Ether network’s total transaction fees, which have continued to decline compared to those for BTC. Lower transaction fees on the Ethereum network after Dencun are to blame for this fall.
Despite the underperformance, some analysts are optimistic that spot ETH ETFs will push Ether price to new highs, with some predicting that Wall Street will use it to bet on Web3’s growth. Others envision the spot Ethereum ETFs attracting over $15 billion by 2025-end, driving ETH price to $5,000 during this cycle.
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