- ETH’s underperformance against BTC reached an annual low
- Coinbase analysts linked weak performance to investor interests and other factors
After peaking in March, the world’s largest altcoin, Ethereum [ETH]has continued to follow Bitcoin [BTC].
ETH reached $4,000 in March and attempted to retest the level after partial approval of US ETH ETFs later that year. And yetETH continues to underperform BTC.
Even the final ETH ETF approval in July didn’t help the altcoin’s underperformance. In fact, it recently hit a yearly low of 0.040 on the ETHBTC ratio, which tracks the value of ETH to BTC.
Source: ETHBTC ratio, TradingView
Reasons for ETH’s dismal performance
In their latest weekly commentary, Coinbase analysts linked ETH’s weak performance to “net buyer interest divergence” based on ETF flows and other factors. Part of the report read,
“We believe this difference in net buyer interest is being embodied in US spot ETF flows. ETH ETFs had nine consecutive days of outflows totaling $115 million between August 15 and 27, while BTC ETFs had inflows totaling $427 million for eight of those nine days.”
Coinbase analysts David Duong and David Han added that ETH ETFs recorded cumulative net outflows of $477 million since inception. On the contrary, BTC ETFs have netted $17.8 billion in inflows since their debut.
The same divergent trend played out when adjusting to the first month of trading. In short, there was a huge demand for BTC ETFs, in contrast to the weak interest in ETH ETFs.
Source: Coinbase
However, the analysts noted that varying debut periods may also have affected the flow differential.
BTC ETFs were launched in January when liquidity was prevalent. On the other hand, ETH ETFs were launched in July during the summer liquidity crisis when most players were on vacation.
Analysts Han and Duong also believe that the lack of a staking feature on US spot ETH ETFs and competition from other smart contract chains such as Solana [SOL] ETH could have gone off the rails.
Furthermore, the lack of a coherent vision of the story and direction of the ETH ecosystem may limit investor interest in the altcoin. Finally, the report cited recent strong criticism of Ethereum founder Vitalik Buterin, who has done just that skeptical of “pure DeFi” as a driving force behind crypto growth.
According to the analysts, divergent views and a disjointed view can make it difficult for investors to understand ETH and its value proposition.
“This divide between thought leaders in the Ethereum community can make it challenging to understand the story and direction of ETH, especially for those unfamiliar with the sector.”
At the time of writing, BTC was trading at $58.9k, up about 20% from its March high of $73k. On the contrary, ETH was valued at $2.5k, down 38% from the March high of $4k.