Despite ETHBTC trending lower in favor of Bitcoin (BTC), there is a chance that the second most valuable cryptocurrency will recover in the months ahead. Taking to X in support of Ethereum (ETH), a crypto analyst, Mckenna, said a favorable combination of protocol-related and regulatory factors may support ETH, plugging the bleed versus BTC and sparking a refreshing rally.
Ethereum Under-performing Bitcoin: Will This Continue?
Looking at the ETHBTC weekly chart, it is evident that Bitcoin bulls have had the upper hand since August 2022. During this time, Bitcoin gained 42% versus ETH, with bulls pressing on when writing.
To illustrate, Bitcoin is at a 2022 low versus ETH and will likely extend gains once a spot Bitcoin ETF is approved by the United States Securities and Exchange Commission (SEC). The crypto community expects this authorization to cement Bitcoin’s position, possibly drawing in billions in capital.
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Some analysts argue that this event could support altcoins, including Ethereum. So far, Ethereum, though edging lower versus Bitcoin, is firm against the USD. McKenna also notes that once a spot Bitcoin ETF is live in the United States, attention will shift to the SEC on whether it will also greenlight a similar product, but for Ethereum.
These 2 Factors Might Support ETH
Despite the ETH weakness versus BTC, Mckenna expects Ethereum to recover in the medium to long term. This is because of the expected preference for proof-of-stake (PoS) consensus systems over proof-of-work (PoW) methods that power Bitcoin.
PoW is a computationally intensive process that uses much energy for block confirmation. This has led to criticism from those who are concerned about the environmental impact of crypto mining. For this reason, Ethereum adopted a PoS system, fully transitioning in 2021 after the Merge.
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Beyond the energy efficiency, the analyst also notes that the PoS in Ethereum provides ETH stakers with a base yield that will be considered “the safest bond instrument in the entire digital asset space.” Subsequently, this may support ETH, with many viewing it as a safe haven. This assurance is based chiefly on the fact that Ethereum is the second most valuable crypto network, with over $276 billion in market cap, according to CoinMarketCap.
Additionally, ETH will, in the long run, be deflationary following the activation of EIP-1559 in August 2021. This system burns a portion of gas fees- the base fee- taking a portion of ETH out of circulation. According to Ultra Sound Money, over 17,600 ETH have been destroyed in the last week alone, 1,000 ETH more than those network issues.
Feature image from Canva, chart from TradingView
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