Ethereum’s steady decline was partly due to lower transaction fees; other leading L2s saw an increase in transaction numbers, but ETH lost out slightly.
Ethereum (ETH) has underperformed since April, especially compared to Bitcoin (BTC). As the altcoin market leader, some participants expect ETH to take the lead in the altcoin bullish movement. But as it stands, altcoins are struggling to catch up with the market.
Source: ETH/BTC on TradingView
The ETH/BTC chart has been in a noticeable downward trend since April 2023. The June 2022 low of 0.049 was protected until April 2024, but a sustained downward trend over the past six months has pushed ETH/BTC to its lowest since April 2021.
Why Ethereum loses value
Long-term Ethereum investors will be concerned about Ethereum losing momentum to Bitcoin so quickly. One of the reasons why tokens are being lost is the inflation that exists within the network since the Dencun upgrade in March 2024.
Source: YCharts
The Dencun upgrade introduces EIP 4844, which significantly reduces transaction costs for L2 transactions. While this is good news for users, lower network fees have reduced the amount of ETH being burned, leading to some token inflation over the past six months.
This was seen on the rising ETH supply chart.
Optimistic activity is definitely on the rise
Source: Santimento
Arbitrum (ARB) and Polygon Ecosystem Token (POL) saw an increase in transaction numbers, but Optimism (OP) was the clear leader. This shows that L2 is becoming more popular.
In particular, Optimism’s outperformance over the rest can be attributed to the rise in Coinbase’s base L2 on the Optimism Superchain.
Read Ethereum (ETH) price prediction for 2024-25
Inflationary ETH and its performance against Bitcoin casts doubt on the idea that Ethereum is money. This problem could be alleviated with more activity, but the market’s lack of confidence in ETH can be exemplified on the ETH/BTC chart.
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