According to Steno SearchEthereum’s (ETH) days of underperforming against the broader crypto market may be numbered following the US Federal Reserve’s (Fed) decision to cut interest rates.
It’s time for Ethereum to shine again
In terms of price appreciation, ETH hasn’t had a particularly impressive 2024. While Bitcoin (BTC) and altcoins like Solana (SOL) and Tron (TRX) have witnessed considerable price gains, ETH is still trading at January 2024 price levels.
Notably, the second-largest digital asset by market cap has fallen 48% against Bitcoin since the Ethereum merge on September 15, 2022.
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For the uninitiated, the Ethereum merge was a major milestone for the leading smart contract platform as it not only changed its consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS), but also brought the issuance of new ETH down from 4% to 1% annually.
As a result, there was a net negative growth in the supply of ETH, with more ETH being burned through transaction fees than issued to stakers.
Ethereum’s unimpressive performance against Bitcoin can be confirmed in the following chart, where the ETH/BTC trading pair was fallen to 0.04, eroding all of its gains against the leading cryptocurrency since April 2021. However, a recent report from Steno Research opines that it is time for Ethereum to make a comeback.
According to the report, the Fed’s decision to cut interest rates could be the fuel that drives ETH’s price surge in the coming months. The report references ETH’s performance during the last altcoin season, where its value more than doubled compared to BTC in less than two months.
This sudden growth was driven by a sharp increase in on-chain activity stemming from growing interest in ecosystems such as decentralized finance (DeFi), non-fungible tokens (NFT), and increased issuance of stablecoins. In a publish On X, Mads Eberhardt, senior cryptocurrency analyst at Steno Research, said:
Lower interest rates -> More network activity -> Higher Ethereum transaction revenue -> Lower ETH supply growth -> Higher ETH price. Let’s go.
Several reasons for Ethereum’s poor performance
Furthermore, the report mentions that Ethereum exchange-traded funds (ETFs) are likely to outperform Bitcoin ETFs. Discussing the main reasons why BTC has outshone ETH so far, Eberhardt notes:
The impact of US spot ETFs for Bitcoin and Ether, persistent buying pressure from MicroStrategy (MSTR), and a notable decline in Ethereum transactional revenue in recent months.
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Despite the headwinds faced, investor confidence in Ethereum remains strong. In a recent report, the CIO of exchange Bitwise called Ethereum, the ‘Microsoft of blockchains’, is hinting at a potential comeback later this year following November’s US presidential election. ETH is trading at $2,543 at press time, up 4.3% in the past 24 hours.
Featured image from Unsplash, charts from Etherscan.io and Tradingview.com