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According crypto-moves/ethereum-will-shine-again/” target=”_blank” rel=”nofollow”>Shorthand Researchethereum’s (eth) days of underperformance against the broader cryptocurrency market may be numbered following the US Federal Reserve’s (Fed) decision to cut interest rates.
It's time for ethereum to shine again
In terms of price appreciation, eth has not had a particularly impressive 2024. While bitcoin (btc) and altcoins like Solana (SOL) and Tron (TRX) have seen considerable price gains, eth is still trading at its January 2024 price levels.
Notably, the second-largest digital asset by market cap has fallen 48% against bitcoin since it merged with ethereum on September 15, 2022.
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For the uninitiated, the ethereum merger was a major milestone for the leading smart contract platform as it not only changed its consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS), but also reduced the issuance of new eth from 4% to 1% annually.
As a result, there has been negative net growth in eth supply, with more eth burned through transaction fees than being issued to stakers.
The unimpressive performance of ethereum against bitcoin can be confirmed from the following chart, where the eth/btc trading pair has fallen to 0.04, eroding all of its 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 Federal Reserve’s decision to cut interest rates could be the fuel that drives eth’s price surge in the coming months. The report references eth’s performance during the last altcoin season, where its value more than doubled compared to btc in less than two months.
This sudden growth was driven by a marked increase in on-chain activity stemming from rising interest in ecosystems such as decentralized finance (DeFi), non-fungible tokens (nfts), and increased stablecoin issuance. x.com/MadsEberhardt/status/1836822587793625389″ target=”_blank” rel=”nofollow”>mail On x, Mads Eberhardt, senior cryptocurrency analyst at Steno Research, said:
Lower interest rates -> More on-chain activity -> Higher ethereum transactional revenue -> Lower eth supply growth -> Higher eth price. Here we go.
Several reasons for ethereum's poor performance
Furthermore, the report mentions that ethereum exchange-traded funds (ETFs) will likely outperform bitcoin ETFs. Analyzing the main reasons why btc has eclipsed eth so far, Eberhardt notes:
The impact of US spot ETFs for both bitcoin and ether, persistent buying pressure from MicroStrategy (MSTR), and a notable decline in ethereum transactional revenue in recent months.
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Despite the headwinds Investor confidence in ethereum remains strong, according to a recent report from the IT director of cryptocurrency exchange Bitwise. called ethereum, the “Microsoft of blockchains,” is hinting that it could make a comeback later this year following the US presidential election in November. eth is trading at $2,543 at the time of writing, up 4.3% over the past 24 hours.
Featured image from Unsplash, charts from Etherscan.io and Tradingview.com
