In the ongoing bullish cycle of the cryptocurrency market, an intriguing phenomenon has caught the attention of market participants: Ethereum (ETH), the second-largest cryptocurrency by market capitalization, is exhibiting significant underperformance relative to Bitcoin (BTC). This observation has sparked widespread discussion and analysis. Historically, during the 2021 bull market, ETH outpaced BTC with much more pronounced gains. However, this traditional pattern has shifted markedly in the current cycle.
Since the beginning of 2024, although ETH’s price has risen, its ratio to BTC (ETH/BTC) has been on a persistent decline, reaching multi-year lows. This anomalous performance stems from a complex interplay of factors, including the macroeconomic environment, changes in industry regulations, technological development trajectories, and shifts in market sentiment. Notably, following the approval of spot ETFs for both BTC and ETH, institutional capital flows have further highlighted the divergent dynamics between these two major cryptocurrencies in the current market cycle.
By analyzing this phenomenon across multiple dimensions, we can gain a deeper understanding of the driving forces shaping the cryptocurrency market today and provide investors with clearer market insights. This article will delve into the key factors contributing to ETH's relative weakness and explore the broader implications of this trend for the entire crypto ecosystem.
The Gap in Investor Education
In the cryptocurrency market, the disparity in public awareness between Bitcoin (BTC) and Ethereum (ETH) is a critical factor that cannot be overlooked. As the first and most well-known cryptocurrency, Bitcoin commands nearly 60% market dominance, an advantage that extends beyond market capitalization to public recognition.
For the general public, the term “Bitcoin” has essentially become synonymous with cryptocurrency. When people think about digital assets, Bitcoin is often the first and only name that comes to mind. This ingrained perception is the result of Bitcoin’s decade-long presence and the extensive media coverage it has received. Whether through traditional or social media, Bitcoin consistently garners the most attention and discussion.
In contrast, Ethereum, despite being the second-largest cryptocurrency by market capitalization, remains significantly less recognized by the average investor. Many newcomers to the crypto space may not have heard of Ethereum or possess only a superficial understanding of it. This gap in awareness translates into distinct investment behaviors: when these investors decide to enter the cryptocurrency market, they naturally gravitate toward the more familiar Bitcoin.
The approval of Bitcoin spot ETFs has further amplified this trend. For traditional investors, ETFs are a familiar investment vehicle, and the introduction of Bitcoin ETFs provides them with a convenient entry point into the crypto market. These investors may lack a deep understanding of cryptocurrency technology but are aware that Bitcoin is the market leader. Consequently, they often view Bitcoin ETFs as the most straightforward and reliable way to gain exposure to the space.
This recognition gap has long-term implications and creates a positive feedback loop: the more people learn about and invest in Bitcoin, the stronger its market dominance becomes, leading to even greater media coverage, which in turn reinforces public recognition and confidence. Ethereum, despite its significant advantages in technological innovation and application scenarios, struggles to overcome this recognition barrier in the short term.
For retail investors, decisions are often driven more by familiarity and comfort than by a deep understanding of the underlying technology or use cases. When they decide to invest in cryptocurrencies, choosing the most widely recognized Bitcoin seems like the safest and most intuitive option. This psychological tendency is especially pronounced in the current market environment and partially explains why Ethereum is underperforming relative to Bitcoin.
Addressing this issue requires greater efforts in investor education, helping people understand Ethereum’s unique value proposition and its broad application potential. However, this is clearly a long-term process. In the short term, this recognition gap will likely continue to influence the market performance of the two leading cryptocurrencies.
The Long-Standing Issue of Expensive Gas Fees
In the cryptocurrency ecosystem, transaction costs and processing speed are critical factors that shape user experience. Ethereum (ETH), as the largest smart contract platform, has long grappled with the problem of high gas fees—a challenge that has significantly hindered the expansion of its user base and the development of its ecosystem.
Gas fees refer to the network usage costs that users must pay for any operation on the Ethereum network. These operations include transferring funds, trading tokens, minting NFTs, or interacting with smart contracts. On Ethereum’s mainnet, even the simplest token transaction typically incurs a gas fee of around $10, which is highly prohibitive for small transactions. Worse still, during periods of network congestion, these fees can skyrocket to tens or even hundreds of dollars. Such exorbitant costs deter many everyday users and have earned Ethereum the moniker of a "blockchain for the wealthy."
In contrast, public blockchains like Solana (SOL) offer a far more cost-effective solution thanks to their innovative technical architecture. On the Solana network, users can complete transactions for just a few cents or even less. This dramatic cost advantage has allowed Solana to dominate during recent trends, such as the MEME token boom. Users on Solana can engage in frequent small-value transactions without worrying about high fees eating into their investment returns.
Beyond cost, Solana also outperforms Ethereum in transaction processing speed. Ethereum’s current throughput is around 15–30 transactions per second (TPS), while Solana can handle thousands of TPS. This high efficiency ensures that transactions on Solana are completed quickly, even during periods of high network activity, avoiding the severe delays or congestion often seen on Ethereum. This performance gap directly impacts user experience and preferences. For everyday users, particularly those engaging in MEME token trading or frequent small transactions, Solana's low-cost and high-speed environment is far more appealing. This explains why many MEME token projects have opted to launch on Solana instead of Ethereum in recent market trends.
Although Ethereum’s development team has been working on Layer 2 (L2) scaling solutions to address the gas fee issue, these solutions often introduce additional complexity, requiring users to understand concepts like cross-chain bridging. Furthermore, these L2 solutions do not resolve the high gas fees on Ethereum's mainnet. In contrast, Solana’s native approach is simpler and more direct, with users not needing to navigate complex inter-chain operations.
This disparity is also reflected in market performance. During the current market cycle, Solana’s price has significantly outperformed Ethereum, partly due to its superior user experience, which has attracted a large influx of new users and capital. This trend underscores the growing importance of technical performance and user experience in the cryptocurrency market. Brand recognition and first-mover advantage alone are no longer sufficient to maintain market dominance.
For Ethereum, the challenge lies in how to effectively reduce usage costs and improve processing speed while maintaining decentralization and security. If these issues are not adequately addressed, Ethereum risks continuing to lose market share to competitors that offer a better user experience.
The Lack of Compelling Applications
In the evolution of the cryptocurrency market, the "DeFi Summer" of 2021 stands out as one of the most glorious periods for Ethereum’s ecosystem. During this time, decentralized finance (DeFi) applications flourished, offering groundbreaking opportunities ranging from lending platforms and decentralized exchanges to yield aggregators. These innovative financial applications provided users with unprecedented avenues for investment and returns, significantly driving up ETH's price.
However, in the current bull market, Ethereum’s ecosystem seems to have lost much of its former luster. While new projects continue to emerge, there is a noticeable lack of groundbreaking applications. Most Ethereum-based projects appear to replicate past successes rather than introduce truly novel use cases. This decline in innovation has dampened user enthusiasm.
A deeper issue lies in the increasing disconnect between Ethereum developers and the practical needs of everyday users. Developers have focused heavily on technical optimizations and architectural improvements, such as zero-knowledge proofs and sharding—important advancements in their own right. However, these innovations have not translated into practical functionalities or applications that resonate with average users.
What do ordinary users care about? They value applications that are easy to understand, simple to use, cost-effective, and offer tangible benefits. Yet many projects in the Ethereum ecosystem are overly complex, requiring users to grasp a myriad of technical terms and intricate concepts just to participate. This high barrier to entry has severely limited the ecosystem's growth.
In contrast, projects on other blockchains often prioritize user experience and practical needs. For example, the MEME token trading on Solana perfectly caters to the speculative interests of everyday users. Transactions are simple, low-cost, and easy to execute, which explains the rapid influx of users to Solana. Ethereum’s developer community, on the other hand, seems trapped in a “technology-first” mindset, prioritizing technical perfection and theoretical innovation over the fundamental purpose of blockchain: serving ordinary users. This misalignment has prevented Ethereum from producing genuinely compelling, “killer” applications in the current market cycle.
To change this situation, Ethereum’s ecosystem needs to rethink its development direction. While technical innovation remains crucial, it is equally important to consider how these advancements can be converted into practical applications that are accessible to everyday users. Developers must step out of their insular, tech-focused circles and actively listen to user feedback to better understand market demands.
When technological breakthroughs are effectively aligned with user needs and create tangible value, Ethereum’s ecosystem can regain its vitality and return to its former glory. Otherwise, even the most advanced technologies will struggle to maintain Ethereum’s leadership in an increasingly competitive cryptocurrency market if they fail to offer compelling use cases.
Conclusion
In summary, ETH's relative underperformance compared to BTC in this bull market can be attributed to three main factors:First, the gap in investor education. BTC, as the undisputed leader of the cryptocurrency market, holds an unshakable position in the minds of average investors. This cognitive advantage has become even more pronounced following the approval of BTC ETFs.Second, the persistent issue of high gas fees on Ethereum. This not only impacts user experience but has also driven many users and projects to rival ecosystems like Solana, which offer more cost-effective solutions.Finally, the lack of truly compelling applications within the Ethereum ecosystem. Developers have focused excessively on technical innovation while neglecting the practical needs of everyday users.
These challenges indicate that relying solely on technical and first-mover advantages is no longer sufficient to secure Ethereum’s market position. Going forward, the Ethereum ecosystem must make substantial improvements in reducing costs, enhancing user experience, and developing practical application scenarios. Additionally, strengthening investor education to help more people understand Ethereum’s value proposition is crucial.
Only by addressing these fundamental issues can Ethereum regain its competitive edge in the future. The current market performance should serve as an opportunity for reflection and improvement within the Ethereum ecosystem, rather than the beginning of a decline.
