3 Reasons Ethereum Outperforms Bitcoin

Ether (ETH) showed significant strength as the year kicked off, although its upward momentum began leveling off around mid-March. The altcoin saw a resurgence starting in mid-May, driven by the anticipation of the approval for spot Ether exchange-traded funds (ETFs) in the United States. Despite trailing behind Bitcoin (BTC) since the beginning of the year, Ether has managed to outperform the leading cryptocurrency since receiving the green light for spot Ether ETFs from the Securities and Exchange Commission (SEC) on May 23. Since May 15, ETH has experienced a 30% increase, contrasting with BTC’s more modest 9% rise in their respective U.S. dollar pairs.

There are three primary factors contributing to ETH’s recent outperformance relative to BTC. These include a rise in network activity and growing enthusiasm surrounding the imminent launch of spot Ether ETFs. Over the last ten days, Ether has trended significantly higher against Bitcoin. Ethereum’s price has climbed 23%, leaving Bitcoin and other major layer-1 tokens lagging. In comparison, Bitcoin’s price has only moved up by 2% over the last month. Other prominent layer-1 tokens, such as BNB Chain’s BNB and Solana’s SOL, have seen gains of 3.35% and 1%, respectively, during the same period.

The ETH/BTC ratio began its upward journey on May 17, climbing to a two-week high of $0.05854 by May 23, marking a 31% increase. Technically, the ETH/BTC weekly chart indicated a bullish divergence from the relative strength index. This has been interpreted by experts like trader and MN Trading founder Michaël van de Poppe as signaling the start of a “trend reversal.” The ETH/BTC ratio is seen as bullish as long as it remains above 0.051. Pseudonymous analyst Plazma echoed a bullish sentiment on May 31, stating that the ratio is significantly undervalued and predicting the ETH/BTC ratio will reach 0.1 within a few months, at which point “10 ETH will be equal to 1 BTC.”

Ethereum’s strong network activity has been a crucial driver behind its recent outperformance. Increased engagement within its ecosystem, particularly among decentralized applications (DApps), has spurred this momentum. Data from DappRadar indicates a 7.75% rise in transaction volume among top Ethereum DApps over the past week, spurred by activities in platforms such as Uniswap, Eigenlayer, MetaMask, and Banana Gun. The number of unique smart contracts on Ethereum also saw an uptick, rising from 37,870 on May 20 to 38,066 by May 31, according to data from CryptoQuant.

Additional insights from CryptoQuant highlight a broader increase in Ethereum’s network activity over the last seven days. Alongside these strengthening on-chain metrics, the anticipation around spot Ether ETFs is adding further fuel to ETH’s bullish trend and empowering its performance against Bitcoin. Bloomberg senior ETF analyst Eric Balchunas has suggested that these investment products might launch by late June, pointing to recent moves by BlackRock as a key indicator.

BlackRock updated its S-1 form for its iShares Ethereum Trust (ETHA) with the SEC nearly a week following the regulator’s approval of its 19b-4 filing. According to Blachunas, this points towards a possible “end of June launch,” though he maintains that an approval around July 4 is more likely. He noted that there might still be further rounds of filings to fine-tune SEC comments. Fellow Bloomberg ETF analyst James Seyffart supported this view, indicating that the updated S-1 form represents the regulatory engagement needed for a launch.

Market sentiment seems optimistic regarding the launch of spot Ether ETFs, with many participants predicting that this will propel ETH to new highs. Some analysts believe that Wall Street will leverage these ETFs as a vehicle to bet on Web3’s growth. There are even speculations that ETH’s price could soar to $10,000 this cycle as institutional capital begins to pivot towards these new investment products.

Ethereum’s recent performance proves that it has undeniable strengths that allow it to not only weather but also thrive in the competitive cryptocurrency landscape. Enhanced network activity, bolstered by the anticipation of new financial products like Ether ETFs, places Ethereum in a strong position to capture further market interest and potentially reach new valuation heights.