Etheruem's (ETH) price continues to underperform compared to Bitcoin’s 2024 gains, but Glassnode analysts suggest that brighter days could lie ahead.

A “weaker capital rotation” is behind Ether’s price underperformance

Data from Cointelegraph Markets Pro and TradingView shows that Ethereum has been underperforming Bitcoin over the last two years, resulting in a weaker ETH/BTC ratio, which reached a low of $0.04622 on May 1, the lowest since April 2021.

Glassnode said Ethereum’s under-performance this cycle relative to Bitcoin is due to a “measurable lag in speculative interest” from the STH cohort.

The report defines the Short-Term Holder cohort as “investors who acquired their coins within the last 155 days and are often considered a proxy for new investor demand.”

Glassnode analysts explained that BTC experienced a “noticeable increase in speculative activity” in terms of capital accumulation among STHs in the run-up to all-time highs in March. This has not been reflected in ETH, which is yet to breach its previous all-time high.

The firm’s on-chain data reveals that while Bitcoin’s STH-Realized Cap is nearly at the same level as the last bull run peak, ETH’s STH-Realized Cap is still less than half of previous cycle levels, suggesting a markedly lackluster inflow of new capital.

“In many ways, this lack of new capital inflows is a reflection of the under-performance of ETH relative to BTC.”

Related: Bitcoin exchange inflows drop to 10-year lows after $74K all-time highs

The market is in the “early stages of a macro uptrend”

Historically, Ether’s price performance has been closely linked to Bitcoin price moves, and the recent price action reflects this relationship.

Bitcoin experienced a sell-off after the fourth halving, dropping 11% to a two-month low of $56,500 on May 1. Bitcoin’s price has since recovered, consolidating within the $62,700 and $65,550 price range over the last two days.

Ether experienced a similar correction after the halving with a 6% drop, recording the “worst post-halving performance” ever, according to Glassnode.

However, measured from the $73,835 all-time high, glass notes that Bitcoin’s price fell by 20.3% – the deepest correction on a closing basis since the FTX lows in Nov-2022.

“That said, this macro uptrend still appears to be one of the more resilient in history, with comparatively shallow corrections thus far.”

Using the Net Unrealized Profit/Loss (NUPL) metric, the on-chain data analytics firm found that both Ether and BTC still have a relatively low Realized Cap associated with Long-Term Holders (LTHs), suggesting the market is “within the early stages of a macro uptrend.”

In an earlier report, Glassnode established that capital inflows into ETH tend to lag behind those into BTC. For instance, during the 2021 cycle, the peak influx of new capital into BTC occurred 20 days before the peak influx into ETH.

Using a 30-day change in the Realized Cap to monitor the rotation of capital between these two assets, Glassnode analysts found that ETH STH Realized Cap is yet to pick up momentum in the current cycle.

“For both assets, the Short-Term Holder variant peaked before the 2021 cycle top. This year, the BTC short-term holder Realized Cap has peaked around the new all-time high, while the ETH metric has hardly moved higher.”

Glassnode concludes that while the post-halving market action has played out remarkably similar to previous cycles, several data points indicate that Ether has underperformed relative to BTC.

“When we break down capital flows and rotation between BTC and ETH, we can see that Bitcoin has received the lion's share of inflows, likely driven in part by the US spot ETFs. Short-term holders and speculation activity appear concentrated within Bitcoin, with a remarkably weak spill-over into Ethereum thus far.”

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