Ethereum (ETH) is currently facing significant selling pressure and fear after a 23% drop that sent its price to yearly lows of $2,200. One of the main concerns for investors is the ongoing underperformance of ETH versus Bitcoin, a trend that has been ongoing since September 2022. Since then, Ethereum is down 44% against Bitcoin.

This drastic drop has left investors and traders questioning the reasons behind Ethereum’s struggles. A recent report from CryptoQuant offers some clarity, pointing out several factors that could be influencing ETH’s performance. As market participants continue to monitor ETH’s movements, many are wondering whether the asset can regain its momentum or if it should expect further declines in the coming weeks.

Ethereum Revealed: CryptoQuant Report Sheds Light

The last CryptoQuant report provides clarity on the factors currently impacting Ethereum (ETH). Declining on-chain activity, degenerating institutional interest, and disappointing performance of Ethereum ETFs compared to Bitcoin are among the major factors contributing to Ethereum’s problems, with the ETH/BTC pair currently trading at 0.0425, its lowest level since April 2021.

Ethereum’s delicate performance appears to be related to weaker network activity dynamics compared to Bitcoin. For example, Ethereum’s total transaction fees continue to decline, largely due to lower fees following the Dencun update. The relative number of transactions also declined dramatically, falling from a record high of 27 in June 2021 to 11, one of the lowest levels since July 2020.

In addition, the supply dynamics of Ethereum are not favorable for price growth. Since the beginning of April, the total supply of ETH has been steadily increasing after the Dencun update. The current supply is 120.323 million ETH, which is the highest level since May 2023.

Additionally, traders and investors clearly favor Bitcoin over Ethereum, as ETH’s relative spot trading volume to Bitcoin has fallen from 1.6 to 0.76 over the past week. Ethereum’s price has historically risen against Bitcoin when its trading volume exceeds Bitcoin’s.

Given these factors, Ethereum may continue to underperform Bitcoin in the near future.

ETH price action

Ethereum (ETH) is currently trading at $2,262 after a significant 23% drop from local highs. Volatility and uncertainty continue to drive the market as ETH tests local demand near yearly lows of around $2,200.

The cryptocurrency remains well below its 4-hour 200-day moving average (MA) at $2,565, a critical indicator that usually signals market strength. For bulls to regain control, it is imperative that the price breaks above this MA and challenges the local highs at $2,600.

However, if Ethereum fails to hold support at its yearly low of $2,200, the price will likely enter a deeper correction, potentially signaling the beginning of a bear market. This level is key to ETH’s near-term recovery, as its loss could trigger further selling pressure. Bulls need to retake these key levels to prevent ETH from sliding into extended bear territory.

Featured image is from Dall-E, chart is from TradingView