- Ethereum’s market dominance has fallen to a low of 13%.
- The declining market share stems from weakening demand, rising supply, and Bitcoin’s increasing dominance.
Ethereum [ETH] has underperformed Bitcoin [BTC] the past year. For example, Bitcoin is up over 120% year-over-year (year-over-year), while Ethereum has gained about 50%.
Ethereum’s underperformance has pushed its market dominance to an all-time low. At the time of writing it stood at 13.85%, a notable decline from the annual high of almost 20%.
Source: TradingView
Several factors have led to the largest altcoin’s declining dominance and its underperformance against Bitcoin.
The increasing dominance of Bitcoin
Bitcoin has witnessed a significant increase in dominance this year. This measure has been forming higher highs since the beginning of the year and is moving within a rising channel.
Source: TradingView
A key factor driving a rise in Bitcoin’s dominance is the high demand for Bitcoin Exchange Traded Funds (ETFs).
Data from SoSoValue shows that spot Bitcoin ETFs currently hold over $57 billion worth of BTC. This shows that institutional interest is high, which stimulates positive price developments.
Whales sell Ethereum
The other factor causing a decline in Ethereum’s dominance is whale sales.
On October 8, a major address that participated in the 2014 Initial Coin Offering (ICO) deposited 5,000 ETH to Kraken, worth $12 million.
This whale has deposited approximately 50,000 ETH, worth $125 million, into the exchange every year for the past two weeks. SpotOnChain.
The Ethereum Foundation, which is also on a sales frenzyhas contributed to Ethereum’s underperformance. Since the beginning of the year, this institution has sold more than $10 million worth of ETH.
An increase in whale sales without an increase in demand could keep ETH trading in range if new buyers fail to enter the market.
Weak demand for ETH ETFs
Unlike Bitcoin, Ethereum has registered low demand for its spot ETFs. Data from CryptoQuant shows that since the launch of these ETFs in July, outflows of $849 million have been recorded.
Source: CryptoQuant
The outflow has been stimulated by the Grayscale Ethereum Trust. The ETFs also suffer from a lack of new inflows.
The BlackRock spot ETH ETF has not posted any inflows over the past two days. At the same time, the Fidelity Ethereum Fund has not seen any positive flows this month SoSoValue.
This weak demand has not yielded any gains for Ethereum, further contributing to a decline in dominance.
Increasing supply
Ethereum is also struggling with a declining burn rate as the currency becomes inflationary. Data from Ultrasound money shows that over 43,000 ETH tokens have been added to the circulating supply in the last 30 days.
Data from Santiment shows that Ethereum’s annual inflation rate recently reached 18%, the highest level since August.
Source: Santiment
Read Ethereum’s [ETH] Price forecast 2024–2025
The lack of new demand to absorb this rising supply will undoubtedly increase pressure on Ethereum on the sell side, causing it to lose market share to Bitcoin and other altcoins.
Ethereum’s declining dominance has also contributed to weakening market sentiment. According to Market Profhit, most traders are bearish on Ethereum, while smart money or institutions remain bullish.
Source: Markt Profhit
