Ethereum is strong at writing but continues to underperform against Bitcoin. Although ETH is floating above $2,400 and could even surpass $3,000 in the coming years, the rapid strengthening of the world’s most valuable coin, on the other hand, could push the ETH/BTC ratio to multi-month lows.
ETH struggles against Bitcoin, ETH/BTC ratio falls to 40-month low
As of September 20, data from IntoTheBlock reveals that ETH is trading at its lowest level against Bitcoin in over 40 months. This trend clearly shows that the market, even with institutional engagement, is bullish on BTC.
Interestingly, ETH continues to underperform despite the approval of Ethereum spot ETFs for trading in July 2024. The approval of these complex derivatives products allowed institutions to gain exposure to the second most valuable coin within the confines of the law without breaking the bank as they did.
Previously, US institutions looking to buy ETH could only do so by purchasing Grayscale ETHE shares. The problem was that fees were higher when the financial world didn’t know about ETH’s regulatory status. While nothing has changed, the approval of spot Ethereum ETFs, preventing issuers from staking coins purchased by customers, was seen as a victory.
The U.S. Securities and Exchange Commission (SEC) has yet to issue an official statement approving ETH as a commodity similar to Bitcoin. However, the Commodity Futures Trading Commission (SEC) has repeatedly stated that ETH is a commodity.
With ETH down against BTC, IntoTheBlock analysts are confident that institutional investors are confident about Bitcoin’s prospects. They particularly highlighted Bitcoin’s relative stability compared to Ethereum, an asset with a higher risk-reward profile.
Will Ethereum Find Support?
Despite this assessment, it is worth noting that Bitcoin remains a transactional layer, taking advantage of its first-mover advantage. On the other hand, Ethereum is the leading smart contract platform and hosts various innovations ranging from DeFi to NFTs, and is now the engine of tokenization.
BlackRock CEO Larry Fink earlier said that the tokenization of real-world assets (RWA), most of which is done on Ethereum, would reach a trillion-dollar market cap. BlackRock has issued BUIDL, a product for tokenizing U.S. Treasuries, on Ethereum.
It remains to be seen whether ETH will rally against BTC. Looking at the daily chart, the trend seems to be changing, at least in the short term. The bullish double-bar formation from September 18 and 19 was confirmed today.
At the same time, ETH appears to be strengthening, turning the corner of the 61.8% Fibonacci retracement level of the 2020-2021 trading range.
