Ether (ETH) Has Dropped Nearly 70% Versus Bitcoin (BTC) Since the Merge, Raising Questions About Its Price Outlook

Ethereum's transition to proof-of-stake (PoS) in September 2022 aimed to be a game-changer for the network.

Despite transitioning to proof-of-stake (PoS) in September 2022, Ethereum (ETH) has underperformed Bitcoin (BTC) by nearly 70%, raising questions about the Merge's impact on ETH's market position.

While the Merge aimed to make ETH a "deflationary" asset, reducing its supply over time, data from UltraSound.Money shows that Ethereum's supply growth rate is close to 0%, indicating that the Merge's disinflationary effect has stalled. At its best, the supply rate was -0.37% in April 2024.

Ethereum's deflationary mechanism depends on EIP-1559, which burns a portion of transaction fees. However, as onchain activity decreases, gas fees drop, leading to fewer ETH burns.

Data from Token Terminal shows that Ethereum's average transaction fee peaked above $15 in March 2024 but saw a sharp decline by April, dropping below $5. The downward trend continued throughout mid-2024, reflecting a steady decrease in network demand.

While fees stabilized in late 2024 and early 2025, they now remain well below previous highs, resulting in a rising Ether supply.

On-chain data from Alphractal reveals that major Ethereum holders have reduced their exposure since the Merge. Wallets holding 100,000 ETH or more have massively decreased their holdings, while addresses with 1 million ETH have also decreased.

“Long-Term and Short-Term Holders stopped accumulating ETH since September 2022,” said Joao Wedson, CEO of Alphractal, adding that the data suggests these holders may be losing confidence in ETH's long-term outlook.

In contrast, Bitcoin wallets holding 100,000 BTC and 1 million BTC have increased substantially since the Merge.

As a result, Bitcoin and Solana (SOL) have gained market share, along with other high-growth ecosystems. Solana has become Ethereum's biggest rival, attracting DeFi and NFT projects that might have otherwise launched on Ethereum. It now commands nearly half of the DEX market, fueled by the Pump.fun memecoin launchpad, which recently surpassed Ethereum in daily volume.

According to Wedson, the Merge is “the worst thing that happened to Ethereum.” However, Ethereum co-founder Joseph Lubin calls Ether's underperformance a regular market cycle occurrence.

But some traders have noticed that ETH loses ground against BTC each time the latter crosses the $100,000 mark.

Ethereum's weekly chart shows ETH/BTC in oversold territory, based on the Relative Strength Index (RSI). At the same time, the pair is trading near a historical support area defined by the 0.024-0.023 BTC range.

Both indicators have led to bounces in the past, suggesting that a relief rally could be coming in the next few weeks. If so, ETH/BTC can rise toward its 50-week exponential moving average (50-week EMA; the red wave) at around 0.042 BTC by March or April.

However, since Ethereum's long-term bearish trend is still in place, a decisive close below the 0.024-0.023 BTC range could lead to further declines toward 0.020 BTC, a key support from the March 2020-May 2020 period.

This article is not intended to be and does not constitute financial advice, trading advice, or any other type of advice. It is crucial to conduct your own research before making any investment decisions.