Ethereum DeFi Ecosystem Loses $29 Billion, BTC/ETH Ratio Hits All-Time High

Ethereum's decentralized finance (DeFi) ecosystem has experienced a significant decline, shedding $29 billion in total value locked (TVL) over the past 30 days. This downturn coincides with a surge in the Bitcoin to Ethereum (BTC/ETH) ratio, which has reached an all-time high. Ethereum opened trading at $1,913 on March 19, consolidating within a 5% range below the $2,000 resistance as investors awaited the U.S. Federal Reserve’s rate decision.

Ethereum's price has been constrained within a narrow range below $2,000, burdened by uncertainties surrounding the Hoodi update and the Federal Reserve’s monetary policy stance. Despite earlier projections that Ethereum could surpass Bitcoin in market capitalization due to its DeFi and smart contract capabilities, Bitcoin has recently outperformed Ethereum, widening the valuation gap.

The BTC/ETH ratio, which measures the relative performance of both assets, hit a record high of 44.6 on March 14. With Bitcoin trading at $83,000 and Ethereum at $1,900, 1 BTC can now purchase over 44 ETH, marking a 30% increase from the 1:33 ratio observed at the recent lows of February 25.

Ethereum's sharp devaluation can be attributed to two primary factors. Firstly, new trade tariff policies have unsettled global markets, prompting crypto investors to seek safety in Bitcoin over Ethereum. Secondly, Ethereum's price has struggled with network scalability issues and failed updates, which have dampened investor confidence. Historical data indicates that Ethereum’s devaluation has accelerated after the Ethereum Merge, with multiple failed network upgrades pushing ETH supply above pre-Merge levels.

The Ethereum Foundation attempted to regain control by reshuffling leadership in February, but investor sentiment remains bleak following the disappointing Pectra and Hoodi updates. For context, Ethereum DeFi’s total value locked (TVL) was $118 billion on February 19. However, as per DefiLlama data on March 19, that figure has now plunged to $89 billion, marking a $29 billion capital outflow—25% of the total deposits within Ethereum’s DeFi ecosystem. This aligns with ETH’s 30% price decline, reinforcing Bitcoin’s dominance as the BTC/ETH trading ratio hit fresh highs.

The $29 billion drop-off in Ethereum’s DeFi TVL, coupled with continued scalability struggles ahead of the Fed rate decision, heightens bearish risks. As liquidity dries up in the DeFi ecosystem, ETH coins previously locked in smart-contracts trickle into the short-term market supply. Hence, if the capital outflows persist, ETH could face further downward pressure, potentially retesting the $1,500 support zone. Additionally, with Bitcoin dominance widening, ETH price risks losing more market share in the near-term, especially if the U.S. Fed rate decision falls below market expectations.

Ethereum price forecast signals lean neutral as it consolidates near $1,941 after a prolonged downtrend, with key technical indicators signaling potential volatility ahead. The 50-day Exponential Moving Average (EMA) at $2,413 and the 100-day EMA at $2,695 indicate a bearish trend, while the 200-day EMA at $2,851 reinforces long-term resistance. Ethereum remains firmly below these moving averages, highlighting persistent selling pressure. However, a bullish reversal could emerge if buyers regain momentum above short-term resistance levels.

The Bearish Balance Power (BBP) indicator at -107.25 suggests that sellers have dominated price action, maintaining downward pressure over the past month. The recent series of lower highs and lower lows further confirm bearish market structure. However, decreasing volume on red candles implies that selling momentum may be weakening, leaving room for a potential relief rally. A breakout above $2,100 could trigger a short squeeze, forcing bears to cover positions, which may result in a rapid move toward $2,400-$2,500 before an ultimate correction. If the U.S. Federal Reserve’s rate decision sparks a positive market reaction, Ethereum could swiftly breach $2,100, invalidating the bearish outlook and exposing short sellers to significant liquidations. Failure to reclaim this level, however, could lead to another retest of $1,700-$1,500, extending the current downtrend.