of cacao data October 10 reveals that the “merge” has been a “disaster” for Ethereum’s performance. According to Kaiko, Ethereum has been lagging behind Bitcoin in price and volume since the first significant upgrade to the smart contract platform was deployed.Thank you for reading this post, don't forget to subscribe!
This trend is likely to continue given the price and volume ratios of Ethereum and Bitcoin in recent days. A clear divergence suggests that Bitcoin could extend its lead over Ethereum, reinforcing Kaiko’s findings.
ETHBTC price on October 10th. Source: ETHBTC on Binance, TradingView
Ethereum merge: changes to proof-of-stake
Ethereum is now a proof-of-stake network where validators, not miners, verify transactions and secure it. Before the merge, Ethereum was a proof-of-work blockchain dependent on miners. In late 2020, Ethereum operated on two networks in parallel, with the current PoS platform, “Beacon Chain”, at the focus.
On September 15, 2022, Ethereum developers finally transitioned the proof-of-work legacy chain to the proof-of-stake beacon chain, marking the beginning of the Ethereum 2.0 era. This event was named “The Merge”.
Energy and environmental considerations advised the transition to Ethereum 2.0 and proof-of-stake. By using validators, Ethereum is now more energy efficient, according to some metrics. Additionally, the developers are planning to further enhance the network by pushing it in a series of upgrades or roadmaps through Surge, Verge, Purge and Splurge.
Bitcoin outperforms ETH before halving
While Ethereum developers are ambitious, Kaiko data shows that Ethereum is underperforming the world’s most valuable coin, a reversal from the pre-merge era. When assessing ETH vs Bitcoin (BTC) both the price and volume ratios are falling.
Ethereum vs Bitcoin Ratio Source: Kaiko on X
The price ratio of ETH to BTC was calculated by dividing the price of ETH by that of BTC. Meanwhile, the volume ratio is calculated similarly, only trading volume is used.
On the spot price ratio, this could suggest that Bitcoin is overvalued compared to Ethereum, which is a bullish formation. On the other hand, a decline in the volume ratio could indicate that users are opting for Bitcoin over Ethereum. This change may be due to other secondary and fundamental factors.
The United States Securities and Exchange Commission (SEC) recently approved several Ethereum futures exchange-traded funds (ETFs). This support means that institutional investors can gain exposure to complex ETH derivatives, directly increasing the liquidity of the coin.
Considering the above volume ratio, Bitcoin has priority ahead of the coin halving event, which will make BTC even more scarce. Additionally, analysts are raising the possibility of the SEC approving the first Bitcoin ETF in the United States, which is net bullish for BTC.
Feature image from Canva, chart from TradingView