According to Stenometric testsEthereum’s (ETH) days of underperformance relative to the broader cryptocurrency market may be numbered following the US Federal Reserve’s (Fed) decision to cut interest rates.

Time for Ethereum to shine again

In terms of price growth, ETH has not had a particularly impressive performance in 2024. While Bitcoin (BTC) and altcoins like Solana (SOL) and Tron (TRX) have seen significant price increases, ETH is still trading at its January 2024 price levels.

It is worth noting that the second-largest digital asset by market capitalization has lost 48% against Bitcoin since the Ethereum merger on September 15, 2022.

For the uninitiated, the Ethereum merger was a major milestone for the leading intelligent contract platform as it not only changed the consensus mechanism from Proof-of-Work (PoW) to Proof-of-Stake (PoS) but also reduced the issuance of novel ETH from 4% to 1% per year.

As a result, there was negative growth in the ETH supply, with more ETH being consumed in transaction fees than was issued to stakers.

Ethereum’s not-so-impressive performance against Bitcoin can be confirmed in the chart below, where the ETH/BTC trading pair fallen to 0.04, wiping out all gains against the flagship 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 will propel ETH prices higher in the coming months. The report refers to ETH’s performance in the recent altcoin season, where the value more than doubled compared to BTC in less than two months.

This sudden augment was fueled by a surge in on-chain activity stemming from growing interest in ecosystems such as decentralized finance (DeFi), non-fungible tokens (NFTs), and higher stablecoin issuance. fasting On the topic of X, Mads Eberhardt, senior cryptocurrency analyst at Steno Research, said:

Lower interest rates -> More on-chain activity -> More Ethereum transaction revenues -> Lower ETH supply growth -> Higher ETH price. Let’s get started.

Some Reasons for Ethereum’s Poor Performance

The report further mentions that Ethereum ETFs will likely outperform Bitcoin ETFs. Discussing the main reasons why BTC has outshone ETH so far, Eberhardt notes:

The influence of US spot ETFs on both Bitcoin and Ether, continued buying pressure from MicroStrategy (MSTR), and a noticeable decline in Ethereum trading revenues in recent months.

Despite headwinds faced, investor confidence in Ethereum remains powerful. In a recent report, the CIO of cryptocurrency exchange Bitwise called Ethereum, the “Microsoft of blockchains,” suggests it could return by year-end after the November U.S. presidential election. ETH is trading at $2,543 at the time of publication, up 4.3% in the past 24 hours.

Featured image from Unsplash, charts from Etherscan.io and Tradingview.com