Kaiko’s data of October 10 shows that the “Merger” has been a “disaster” for the performance of ethereum. According to Kaiko, ethereum has been trailing bitcoin in price and volume since the critical update was deployed to the first smart contract platform.
The trend is likely to continue, looking at the price and volume ratios of ethereum and bitcoin over the past few days. A clear divergence shows that bitcoin could be widening its lead over ethereum, reinforcing Kaiko’s findings.
The ethereum Merger: Switch to Proof of Stake
ethereum is now a proof-of-stake network where validators, not miners, confirm transactions and secure them. Before the merger, ethereum was a proof-of-work blockchain that relied on miners. At the end of 2020, ethereum was operating on two networks in parallel, with the current PoS platform, the “Beacon Chain”, as the focus.
On September 15, 2022, ethereum developers finally swapped the legacy proof-of-work chain for the proof-of-stake Beacon Chain, launching the ethereum 2.0 era. This event was called “The Fusion”.
Energy and environmental considerations advised the move to ethereum 2.0 and proof of stake. By using validators, ethereum is now more energy efficient, according to some metrics. Additionally, the developers plan to further improve the network, rolling it out in a series of updates or roadmaps through Surge, Verge, Purge, and Splurge.
bitcoin Is Outperforming eth Before Halving
While ethereum developers are ambitious, Kaiko data shows that ethereum has underperformed the world’s most valuable currency, a reversal from the pre-merger era. Both price and volume ratios are falling when measuring eth against bitcoin (btc).
The price ratio of eth and btc was calculated by dividing the price of eth by btc. Meanwhile, the volume ratio is calculated in a similar way, only trading volumes are used.
On the spot price ratio, it may suggest that bitcoin is overvalued against ethereum, a bullish formation. On the other hand, reducing the volume ratio may indicate that users are opting for bitcoin instead of ethereum. This change may be due to other secondary and fundamental factors.
The United States Securities and Exchange Commission (SEC) recently approved several ethereum futures exchange-traded funds (ETFs). This support means that institutional investors can gain exposure to complex eth derivatives, directly increasing the liquidity of the coin.
Considering the above volume ratio, bitcoin‘s preference is ahead of the coin’s halving event, which will make btc more scarce. At the same time, analysts are increasing their odds that the SEC will approve the first spot bitcoin ETFs in the United States, a net bullish outcome for btc.
Featured image from Canva, TradingView chart
