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Ethereum's Price Plunge: Institutional Shift to Bitcoin ETFs

Coin WorldWednesday, Feb 5, 2025 6:29 am ET

1min read

Ethereum's price has been declining, raising concerns about potential challenges as institutional investors shift their focus towards Bitcoin Exchange-Traded Funds (ETFs). The ETH/BTC ratio has reached a low of 0.027, indicating a significant shift in institutional investment trends.

Ethereum has underperformed against Bitcoin, with a staggering 70% decline in the ETH/BTC ratio since September 2022. This underperformance is partially driven by Ethereum becoming inflationary again, as indicated by analysts from CryptoQuant. The total supply of Ethereum has surged approximately 5.4% since February 2024, deviating from earlier expectations that it would remain deflationary post-Merge.

Institutional investors have shown a clear preference for Bitcoin, with Bitcoin ETFs attracting record inflows of $35 billion, while Ethereum's ETFs managed to pull in only $2.6 billion. This growing preference underscores a lack of robust catalysts supporting Ethereum's price, as noted by Pratik Kala, head of research at Apollo Crypto.

Adding to Ethereum's woes, the blockchain's market dynamics have become increasingly inflationary. The circulating supply has crept back to levels seen before Ethereum's pivotal transition to proof-of-stake. Looking ahead, Ethereum faces additional hurdles as it grapples with internal tensions within its development community. The Ethereum Foundation has prompted discourse surrounding the roadmap for enhancements, with Vitalik Buterin acknowledging the need for reforms to support clearer leadership and bolster investor confidence.

The upcoming Pectra upgrade, expected by March, is anticipated to enhance the blockchain's capacity, potentially turning the tide for Ethereum's market performance. Should these upgrades successfully address the current technical hurdles, analysts believe they could lead to a reversal of Ethereum's ongoing downtrend.

In conclusion, Ethereum's position against Bitcoin has weakened considerably, with recent metrics underscoring a broader institutional pivot towards BTC. While the anticipated Pectra upgrade offers a glimmer of hope for restructuring Ethereum's value proposition, ongoing leadership challenges and market dynamics continue to dictate a cautious outlook for Ethereum's future. Investors will be watching closely to see if upcoming changes can revitalize interest and stabilize Ethereum's standing in the crypto landscape.

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