Ethereum’s Underperformance Against Bitcoin
Ethereum has entered one of its most undervalued phases in years, according to crypto asset manager Bitwise. The firm highlights ETH’s consistent underperformance against Bitcoin since late 2022, with the ETH/BTC ratio dropping by 47% over the past 12 months.
Currently, 1 ETH trades for 0.027 BTC, significantly below historical levels.
Why Ethereum is Struggling
According to Bitwise Europe’s head of research, Andre Dragosch, Ethereum is “fundamentally mispriced” compared to its on-chain activity and adoption metrics. Several factors have contributed to ETH’s lagging performance:
- AI, Meme Coins, and Tokenized Assets
The rise of artificial intelligence tokens, meme coins, and real-world asset tokenization has driven demand toward cheaper, lower-fee blockchains, making Ethereum’s congested and expensive network less attractive. - Layer 2 Scaling Fragmentation
The expansion of Layer 2 solutions like Arbitrum and Optimism has scattered activity across multiple networks, reducing the transaction volume directly captured by Ethereum’s base layer.
Trading Pair Pressure
Ethereum’s widespread use as a trading pair across crypto markets has made it more susceptible to arbitrage-related downward pressure, further hindering price growth.
Signs of a Potential Ethereum Rebound?
Despite Ethereum’s struggles, Bitwise notes historical patterns suggest a possible ETH recovery in February. In fact, Ethereum has outperformed Bitcoin in seven of the past eight years during this period.
However, ETH remains significantly behind BTC in 2025:
- Bitcoin is up 3.72% year-to-date, while Ethereum has dropped 20%.
- BTC hit a new all-time high above $109,000, whereas ETH remains 46% below its 2021 peak of $4,891.70.
ETF Disparity Reflects the Gap
Ethereum’s lagging performance is also reflected in the exchange-traded fund (ETF) market:
- U.S. Bitcoin ETFs hold $115 billion, equivalent to 5.9% of BTC’s market cap.
- Ethereum ETFs hold just $10.15 billion, or 3.1% of ETH’s market cap.
This stark contrast underscores investor preference for Bitcoin over Ethereum in the current market cycle.
