Crypto

Ether-Bitcoin Ratio Hits 3-Year Low Amid ETF Woes, $63.5M Outflows

ETH/BTC ratio hits lowest since April 2021 amid investor shift to Bitcoin and regulatory uncertainties for Ether.

By Barry Stearns

5/16, 08:17 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • ETH/BTC ratio hits a three-year low, sliding nearly 16% YTD amid reduced demand for ether ETPs and $63.5 million in net outflows.
  • Bitcoin's appeal strengthens with $92.5 million inflows into BTC ETPs and approval of spot bitcoin ETFs, contrasting with Ethereum's uncertainties.
  • SEC's hesitancy on approving spot ETH ETFs, alongside competition from layer 1 networks like Solana and anti-ETH sentiment, pressures Ethereum.

Ether Slides Against Bitcoin

The ETH/BTC ratio has hit its lowest point since April 2021, marking a significant shift in the cryptocurrency market dynamics. On Binance, the ratio dropped to 0.04563, encapsulating a nearly 16% decline year-to-date. This downtrend is emblematic of a growing preference for Bitcoin over Ether among investors, as evidenced by the performance of their respective exchange-traded products (ETPs). While Bitcoin ETPs attracted $92.5 million last week, Ether ETPs saw net outflows amounting to $63.5 million, with the largest losses recorded by Hong Kong-listed ETFs. This shift in investor sentiment is underscored by the bearish 'death cross' pattern observed a month ago, signaling potential extended losses for Ether when priced against Bitcoin.

Competition and Regulatory Uncertainty

The declining interest in Ether can be attributed to several factors, including the rise of competing layer 1 (L1) blockchains and the ongoing uncertainty regarding the approval of spot ETH ETFs in the United States. David Han, a research analyst at Coinbase Institutional, highlighted the impact of competing L1s like Solana, which has significantly increased its share in decentralized exchange volumes from 2% to 21% within a year, thereby challenging Ethereum's dominance in the dApp space. Furthermore, the approval of nearly a dozen spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) in January, drawing approximately $12 billion in net inflows, has reinforced Bitcoin's status as a preferred macro asset, leaving Ether grappling with fundamental positioning questions within the crypto sector.

SEC's Stance on Ether ETFs

The SEC's decision-making process on Ether ETFs remains a focal point of speculation and concern. With deadlines looming for the applications by VanEck and BlackRock, the market is closely watching the regulator's moves. Polymarket traders estimate only a 10% chance of an Ether ETF approval by May 31, reflecting the prevailing skepticism. Finance lawyer Scott Johnsson suggests that the SEC may find grounds to deny these applications, arguing they have been improperly filed as commodity-based trust shares. This regulatory ambiguity adds another layer of complexity to Ether's market outlook, potentially delaying the influx of capital that a spot ETF approval could bring to Ethereum's native token.

Street Views

  • David Han, Coinbase Institutional (Bearish on ETH compared to BTC):

    "The approval of spot bitcoin ETFs in the U.S. has reinforced bitcoin’s store-of-value narrative and its status as a macro asset. On the other hand, open questions about ETH’s fundamental positioning within the crypto sector remain. Competing layer-1s (L1s) like Solana detract from Ethereum’s positioning as the 'go-to' network for decentralized app (dApp) deployment."

  • Ilan Solot, Marex Solutions (Bearish on Ether):

    “Capital gets fragmented... The capital gets fragmented," and "strong anti-ETH sentiment from [rival] Solana community and Bitcoin propounders is driving negative ether narratives and the high beta cryptocurrency is a 'perfect vehicle' for external players to express bearish view given it trades on traditional exchanges such as the Chicago Mercantile Exchange."