Divergent On-chain Trends Within Ethereum/Bitcoin Network Add to Reasons Why the ETH/BTC Price Might Continue Dropping

In recent weeks, there has been a sharp decline in the exchange rate between Ether (ETH), which runs the Ethereum blockchain and is the second-biggest cryptocurrency in the world by market capitalization, and Bitcoin (BTC), which is the first and largest cryptocurrency in the world.

The price of ETH/BTC was last trading at roughly 0.0625 on Binance (according to TradingView), down about 15% from previous monthly highs in the 0.0735 region and at its lowest point since July 2022.

Ether’s underperformance is not the cause of the decline in ETH/BTC. Ether, on the other hand, is currently up in the $1,750 range, up over 27% from previous monthly lows under $1,400, and is up just under 10% this month.

The issue with Ether is that, like the majority of other cryptocurrencies, it hasn’t been able to outpace Bitcoin. In cryptocurrency markets, Bitcoin has been driving prices upward amid what analysts have dubbed a “safe haven” bid as flaws appear in the world financial system.

Financial Stability Concerns Disproportionately Benefit Bitcoin

Credit Suisse was acquired by Swiss rival UBS over the weekend after three significant regional US banks failed earlier this month. The American bank First Republic received a $30 billion bailout last week from a group of US institutions that got together.

Investors remain on edge that additional banks, in the US and overseas, may be ready to fail despite efforts by authorities to calm the situation. Also, even if this is depressing investor confidence in US stock markets, it looks to be benefiting safe-haven assets like gold and cryptocurrencies like Bitcoin.

Throughout thousands of years, gold served as the foundation of most civilizations’ financial systems. As a result, whenever problems in the fiat-based, central bank-centred fractional reserve banking system arise, many investors choose to return to gold, which many regard as the ultimate safe haven.

But Bitcoin, which many people refer to as “digital gold,” is becoming more and more accepted as a sanctuary. After all, it is a very reliable, highly decentralised payment system that functions completely independently from the established financial system.

Ether can also assert its strength, decentralisation, and independence from the established financial system. It actually surpasses Bitcoin in that an independent decentralised finance ecosystem can be constructed directly on top of its blockchain thanks to its clever programmability (and already is being built).

Yet, Ether is just around half as old as Bitcoin. Many investors view Bitcoin as having greater credibility because its chances for the future don’t depend on programmers’ efforts (like the Ethereum Foundation who are still working to upgrade the Ethereum blockchain). It is anticipated that bitcoin would remain essentially unchanged from where it is at the moment, similar to gold.

On-chain Trends Favor Further ETH/BTC Downside

As investors look to Bitcoin more and more as a haven, a number of key on-chain activity metrics are heading higher, indicating a rising need for network utilisation. On many of the same indicators, the Ethereum blockchain is not exhibiting this increase in activity.

This might make it harder for ETH to stay up with Bitcoin, which might lead to further negatives for the ETH/BTC exchange rate. Yet, it won’t necessarily stop Ether from continuing to rise (not if the broader crypto market keeps booming).

The first metric to take attention is the quantity of daily transactions. The graphs below, provided by The Block, show that this indicator recently reached its highest level for the Bitcoin network since early 2021, while remaining moderate and within recent ranges for the Ethereum network.

While the increase in the number of active addresses on the Bitcoin network hasn’t been as significant lately, the statistic is still very near to multi-month highs. Regarding the quantity of active addresses on the Ethereum network, the same cannot be true.

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