Over the past year, Ethereum [ETH] has struggled to keep up with Bitcoin [BTC], with Bitcoin having a year-on-year (YoY) gain of over 120%, while Ethereum’s gain has been around 50%.
This underperformance has led to Ethereum’s market dominance plummeting to its lowest levels recently, standing at 13.85% compared to a high of nearly 20% earlier this year.
The Surge in Bitcoin Dominance
Bitcoin’s dominance has seen a considerable increase, forming higher highs and moving within an ascending channel since the year began.
One significant factor contributing to Bitcoin’s dominance surge is the strong demand for spot Bitcoin exchange-traded funds (ETFs).
Data from SoSoValue reveals that spot Bitcoin ETFs currently hold over $57 billion worth of BTC, showcasing high institutional interest fueling positive price trends.
Whales Engaging in Ethereum Sell-offs
Another factor impacting Ethereum’s dominance decline is the increase in whale selling activities.
For example, on October 8th, a substantial address involved in the 2014 Initial Coin Offering (ICO) deposited 5,000 ETH worth $12 million onto Kraken.
This whale has transferred around 50,000 ETH valued at $125 million to exchanges in the past two weeks, as per SpotOnChain data.
Moreover, the Ethereum Foundation has been actively selling off ETH, contributing to Ethereum’s underperformance, with over $10 million worth of ETH sold since the beginning of the year.
If the uptick in whale selling persists without an increase in demand, Ethereum might continue trading rangebound unless new buyers enter the market.
Weakened Demand for ETH ETFs
In contrast to Bitcoin, Ethereum has experienced low demand for its spot ETFs, with CryptoQuant data indicating outflows of $849 million since the launch of these ETFs in July.
The outflows have been triggered by the Grayscale Ethereum Trust, while the ETFs struggle with a lack of fresh inflows.
For instance, the BlackRock spot ETH ETF has seen zero inflows in the past two days, and the Fidelity Ethereum Fund has not recorded positive flows this month, according to SoSoValue.
This diminished demand has failed to propel Ethereum’s gains, further contributing to its declining dominance.
Increase in Supply
Ethereum is also facing challenges due to a declining burn rate, leading to inflation. Ultrasound Money data shows that over 43,000 ETH tokens were added to the circulating supply in the last 30 days.
Recent figures from Santiment indicate that Ethereum’s annual inflation rate has climbed to 18%, the highest level since August.
The rising supply without corresponding fresh demand could intensify selling pressure on Ethereum, causing it to lose market share to Bitcoin and other altcoins.
Ethereum’s decreasing dominance has also contributed to a waning market sentiment, as per Market Prophit, with most traders holding bearish views on Ethereum, while institutional investors remain bullish.