The relationship between Ethereum (ETH) and Bitcoin (BTC) has long been a focal point for crypto investors assessing market dynamics. Recently, the ETH/BTC ratio—a key metric that measures how many Ether units it takes to buy one Bitcoin—plunged to a five-year low of 0.018 on April 9, signaling a significant underperformance by Ethereum relative to Bitcoin. This milestone underscores a broader trend: since its 2015 launch, Ethereum has underperformed Bitcoin on 85% of all trading days, according to on-chain data analyzed by Glassnode’s James Check.
At the time of writing, Ethereum trades around $1,670**, while Bitcoin holds near **$75,000—a level more than 275% above its 2017 bull market peak. By contrast, ETH has fallen below its 2018 cycle high, erasing nearly seven years of relative price gains against BTC. For long-term holders who bought into Ethereum’s promise of becoming the "world computer," this prolonged lag raises serious questions about its investment thesis and network vitality.
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Historical Performance: A Story of Missed Momentum
While Ethereum briefly outperformed Bitcoin during two key windows—mid-2015 to mid-2017 and late 2019 to early 2020—the broader trend has been one of consistent underperformance. These short bursts of strength were fueled by early smart contract adoption and the DeFi summer boom, respectively. However, since 2020, Bitcoin has reasserted dominance as the primary store-of-value asset in the crypto ecosystem.
James Check from Glassnode emphasizes that Ethereum has only outpaced Bitcoin on 15% of trading days in its entire history. This lopsided performance ratio suggests that despite its technological advancements and ecosystem growth, ETH has struggled to maintain investor confidence during macro market cycles.
Network Activity Stagnation Raises Red Flags
One of the most concerning indicators comes from user engagement metrics. On April 8, Web3 researcher Stacy Muur highlighted that the number of active Ethereum addresses has remained flat for four consecutive years. Despite upgrades like The Merge and EIP-4844 aimed at improving scalability and sustainability, fundamental on-chain activity shows little growth.
“I love Ethereum. However, it’s time to face reality: Ethereum has had around the same number of active addresses for the past 4 years,” Muur stated on X.
This stagnation contrasts sharply with Ethereum’s vision of becoming a decentralized foundation for global applications. While core development continues, flat user adoption challenges the narrative that Ethereum is winning the platform war.
The Layer-2 Shift: Success at a Cost?
A major factor behind declining base-layer activity is the migration of users to Ethereum layer-2 (L2) networks such as Arbitrum and Optimism. These scaling solutions offer faster transactions and significantly lower fees—making them more attractive for everyday use.
According to L2beat’s data, total value locked (TVL) across L2s has surged, reflecting strong user adoption. At the same time, Ethereum’s average transaction fee has dropped to $0.41**, the lowest since late August and down from a high of **$15.21 just two years ago. While lower fees indicate reduced network congestion, they also point to weaker demand for block space—a critical revenue stream for miners and validators.
Critics argue this shift undermines Ethereum’s economic model. Nic Carter of Castle Island Ventures contends that “greedy Eth L2s” are capturing user activity and fees without sufficiently contributing back to the base layer. He warns that unchecked token issuance and fragmented revenue flows are weakening Ethereum’s long-term investment case.
Quinn Thompson, founder of Lekker Capital, went further, declaring Ethereum “completely dead” as an investment due to declining transaction volume, stagnant user growth, and shrinking network revenues.
Revenue Erosion: A Growing Concern
Network revenue—derived from transaction fees paid to validators—is a vital health indicator for any blockchain. Data shows that Ethereum’s fee income has collapsed by 99% over a six-month period in 2024, largely due to the offloading of transactions to L2s. With fewer transactions occurring on the mainnet, validators earn less, reducing the economic incentive to secure the network.
This trend threatens Ethereum’s transition to a sustainable fee market post-merge, where staking rewards are meant to be supplemented by consistent fee capture. If most economic activity remains off-chain or on L2s, the base layer risks becoming a settlement layer with limited direct utility—a role that may not justify its current valuation.
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FAQ: Understanding the ETH/BTC Ratio and Ethereum’s Challenges
Q: What does the ETH/BTC ratio mean?
A: The ETH/BTC ratio shows how much Ether is needed to buy one Bitcoin. A falling ratio means ETH is losing value relative to BTC, indicating weaker investor sentiment toward Ethereum.
Q: Why is Ethereum underperforming Bitcoin?
A: Several factors contribute: stagnant on-chain activity, migration to layer-2 networks, declining fee revenue, and Bitcoin’s resurgence as a macro asset amid institutional adoption and ETF approvals.
Q: Does low transaction fee mean Ethereum is failing?
A: Not necessarily. Low fees can reflect improved scalability. However, persistently low fees combined with flat user growth suggest weak demand, which impacts network security and long-term value accrual.
Q: Are layer-2 networks bad for Ethereum?
A: No—they’re essential for scaling. But if they drain too much economic activity without feeding value back to the base layer, it could weaken Ethereum’s overall economy.
Q: Can Ethereum regain momentum?
A: Yes, through continued protocol upgrades (like full danksharding), increased adoption of restaking protocols, and renewed demand for on-chain applications such as decentralized identity or AI-integrated dApps.
Q: Is holding ETH still a good investment?
A: That depends on your outlook. ETH remains central to DeFi, NFTs, and Web3 infrastructure. However, investors should weigh its technological promise against current economic headwinds and competitive pressures.
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Looking Ahead: Can Ethereum Reclaim Its Narrative?
Despite the challenges, Ethereum remains the leading platform for decentralized applications. Its developer community is among the most active in blockchain, and upcoming upgrades aim to further reduce costs and increase throughput.
However, reclaiming investor confidence will require more than technical progress. It demands measurable improvements in user growth, on-chain revenue, and value retention at the base layer. Without these, the risk of Ethereum becoming a backend settlement layer—rather than a vibrant user-facing ecosystem—grows stronger.
The current downturn may also present strategic opportunities. Long-term believers argue that undervaluation relative to Bitcoin could set the stage for a future catch-up cycle, especially if macro conditions improve or new use cases emerge.
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