Why Ethereum (ETH) Continues to Trail Bitcoin (BTC) Despite ETF Approval

After peaking in March, the world's largest altcoin, Ethereum [ETH], has continued to trail Bitcoin [BTC]. ETH hit $4k in March and attempted to retest the level after partial approval of U.S spot ETH ETFs later in the year. And yet, ETH has continued to underperform BTC.

World’s second largest cryptocurrency, Ethereum (ETH), has continued to underperform Bitcoin (BTC) after peaking in March.

ETH hit $4,000 in March and later attempted to retest the level following the partial approval of U.S. spot ETH ETFs. Despite this, ETH has continued to underperform BTC.

Even the final approval of ETH ETFs in July did not help the altcoin’s underwhelming performance. In fact, it recently hit a yearly record low of 0.040 on the ETHBTC ratio, which tracks ETH’s value relative to BTC.

Coinbase analysts, in their latest weekly commentary, linked ETH’s weak performance to “net buyer interest divergence” based on ETF flows and other factors.

“This divergence in net buyer interest is embodied in US spot ETF flows in our view. ETH ETFs have had nine consecutive days of outflows between August 15 and 27 totaling $115M, while BTC ETFs had inflows eight of those nine days netting to $427M,” the report stated.

Coinbase analysts David Duong and David Han also highlighted that ETH ETFs have recorded a cumulative net outflow of $477 million since their launch. In contrast, BTC ETFs have netted $17.8 billion in inflows since their debut.

When adjusted to the first month of trading, the same diverging trend was observed. In short, BTC ETFs saw a massive demand, unlike the weak interest in ETH ETFs.

However, the analysts noted that the varying debut periods could also be impacting the difference in flows.

BTC ETFs launched in January when liquidity was high. On the other hand, ETH ETFs launched in July during the summer liquidity crunch, when most participants were on vacation.

According to analysts Han and Duong, the lack of a staking feature on U.S. spot ETH ETFs and competition from other smart contract chains such as Solana (SOL) may have also hindered ETH’s performance.

Moreover, the lack of a coherent vision for the ETH ecosystem’s narrative and direction could have also limited investor interest in the altcoin. Lastly, the report pointed to recent strong criticism faced by Ethereum founder Vitalik Buterin, who has been skeptical of “pure DeFi” as a driver of crypto growth.

According to the analysts, such diverging viewpoints and a lack of a coherent vision could make it difficult for investors to understand ETH and its value proposition.

“This divide between thought leaders in the Ethereum community may make it challenging to understand ETH’s narrative and direction, particularly for those not familiar with the sector.”

At the time of writing, BTC was trading at $58,900, around 20% away from its March highs of $73,000. On the other hand, ETH was valued at $2,500, down 38% from its March highs of $4,000.

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