“The ETH/BTC ratio hits a new yearly low, adding fuel to the fire of excitement surrounding the potential approval of a spot Bitcoin ETF.”
The anticipation of a spot Bitcoin ETF being approved has led to a surge in the price of Bitcoin in the past week. However, Ethereum’s lack of a “compelling long-term narrative” and concerns surrounding Ethereum staking have moderated its gains.
The price of Ethereum in Bitcoin, tracked by the ETHBTC trading pair, continues to decline amid the hype surrounding a potential Bitcoin spot ETF approval in the US. ETHBTC fell to 0.051, reaching its lowest level this year and approaching its June 2022 lows. This ratio hasn’t dipped below 0.049 since before May 2021.
While Bitcoin has gained nearly 20% in the past week, reaching a new yearly peak of $35,157, Ethereum’s price has had a more modest increase of 13.4%. Bitcoin and Solana-based investment products have seen significant inflows, while Ethereum-based funds experienced outflows.
The positive flows in Bitcoin are attributed to the anticipation of a spot Bitcoin ETF and concerns over Ethereum. The market has become hopeful about ETF approval in the US, especially after Grayscale’s recent court victory and the influx of applications for Bitcoin spot ETFs by traditional finance heavyweights.
Bitfinex analysts believe that the primary bullish narrative for the market has been ETF products, whereas Ethereum lacks a compelling long-term narrative. Every bullish narrative for Ethereum has resulted in less significant spikes for the Bitcoin-Ethereum ratio.
Institutions may feel more comfortable investing in a Bitcoin spot ETF because they perceive it as less risky compared to Ethereum futures. While six Ethereum-futures-based ETFs were launched in the US, their opening trading was sluggish, and they haven’t generated significant demand.
Concerns have also been raised about Ethereum staking and its implications for the network. Centralization concerns exist over the leading liquid staking derivative platform, Lido, which commands a dominant share of staked Ether. The growing number of validators can impact the network’s performance and reduce yields for individual validators.
Furthermore, the possibility of an untested economic regime where the staked Ether market cap exceeds the unstaked Ether market cap raises unfounded risk. The recent drop in fees and Ethereum turning inflationary also contribute to the lack of demand.
Overall, the price of Bitcoin has been driven up by the anticipation of a spot Bitcoin ETF approval, while concerns and a lack of a compelling narrative have moderated the gains of Ethereum. Investors are closely watching the market dynamics between Bitcoin and Ethereum as they search for profitable opportunities.