Ethereum is Suffering Serious Blood Loss Against Bitcoin, but According to Data, This Time It's Different! - Coin Bulletin

Ethereum (ETH) has reached its lowest valuation since 2019 compared to Bitcoin (BTC), and despite its historical advantage, rising supply pressure, weak demand, and stagnant activity are making recovery difficult.

According to CryptoQuant data, the Ethereum valuation measured by the ETH/BTC MVRV ratio has fallen to extremely low levels compared to Bitcoin. Historical data suggests that such low levels typically indicate periods when ETH outperforms BTC, but current fundamental indicators suggest that the situation might be different this time.

The total supply of Ethereum has risen again, recently reaching a new record level of 120.7 million ETH. This situation indicates a clear deviation from the deflationary narrative that emerged post-Merge, signaling a return to inflationary emission. The increasing supply creates selling pressure on the ETH price, especially when there are no strong demand catalysts.

The Dencun update reversed deflation.

The Dencun update significantly reduced transaction fees, almost bringing the ETH burn rate to zero, which led to a renewed increase in supply. Since the burn mechanism of EIP-1559 is tied to gas fees, Dencun's success in reducing costs inadvertently weakened the monetary tightening framework of Ethereum. This structural change indicates that a return of deflationary supply dynamics in the short term is unlikely.

Ethereum's network activity has been flat since 2021, with metrics such as transaction count and active addresses not showing sustainable growth. Although Layer 2 networks have expanded, much of this growth occurred at the expense of mainnet activity. This cannibalization effect is reducing demand for Ethereum block space, weakening fee formation and the value appreciation narrative for ETH.

Investor demand for ETH is weakening due to the decrease in staked ETH, and the decline in balances held in ETFs and other investment vehicles. As the total staked value falls from record levels, fund assets are also showing a downward trend, indicating a loss of confidence among both crypto-focused participants and traditional investors.