Ether disappointment has Bitcoin gaining crypto market share during downturn
ETHER is ceding ground to market bellwether Bitcoin with investors seeking refuge in the most widely-held digital asset while the recent downturn in crypto prices deepens.
The second-largest digital currency by market value has slumped around 18 per cent since June, while Bitcoin was down around half that amount during the same period. Ether dropped as much as 5.4 per cent to US$1,639 on Monday (Oct 9), and the original cryptocurrency slipped as much as 2.3 per cent to US$27,290.
That has helped to reduce Ether’s percentage of the total capitalisation of the US$1 trillion crypto market to 17.8 per cent from around 18.4 per cent at the start of the year, according to data compiled by CoinMarketCap. Meanwhile, Bitcoin’s dominance has risen to 50.3 per cent from 40 per cent.
In recent weeks, concern over Ethereum’s growth and prospects have swirled, as activity and fees on the network plummeted and the coin’s supply began to grow again after months of deflation. Fear of centralisation in the Ethereum network has been growing as well. Fresh turmoil in the Middle East and the possibility of more interest-rate increases has many crypto investors shifting to Bitcoin, which has long outperformed in bear markets.
Overall, Bitcoin is up 66 per cent this year, compared with 32 per cent for Ether. The difference is even more staggering if looking at data since Sep 15, 2022, when Ethereum underwent a network upgrade called the Merge that kept investors on tenterhooks for months.
“In fact, Ether has been massively underperforming the broad market since the Merge, with both the ETH/BTC price and volume ratio trending downwards over the past year,” according to a report from researcher Kaiko. “Ether’s underperformance is likely due to the ongoing impact of the bear market, which historically has seen traders turn to Bitcoin.”
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Some near-term factors have added to the pressure. The Ethereum Foundation, which is working to grow the network’s ecosystem, sold about US$2.7 million worth of Ether on Monday, and converted it into stablecoin USDC, according to data tracker Etherscan and Arkham Intelligence. The foundation did not immediately respond to a request for comment.
Some traders also pointed out that crypto entrepreneur Justin Sun moved some of his Ether. Sun told Bloomberg he is “not selling”, and was just moving his Ether between wallets.
“I am bullish about ETH and I think currently is a good time to buy,” Sun said in a message.
Meanwhile, the futures-based Ether exchange-traded funds that started trading on US markets last week have “failed to attract meaningful volume and boost crypto markets”, according to Kaiko.
“It could be that the Ethereum futures ETF launches may have caused Ethereum to be overbought by investors or traders, and the launches were rather mundane and underwhelming,” said James Seyffart, an analyst at Bloomberg Intelligence. BLOOMBERG
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