Ethereum (ETH) Ecosystem Debate Rages as ETH/BTC Ratio Hits a New Low

The Ethereum (ETH) ecosystem is currently embroiled in a heated debate regarding its investment potential, triggered by the persistent decline of the ETH/BTC ratio

The Ethereum (ETH) ecosystem is currently engrossed in a heated debate concerning its investment potential, largely triggered by the persistent decline of the ETH/BTC ratio. This metric, which measures Ethereum’s relative price performance against Bitcoin, has recently hit a new low of 0.022.

The ratio, having been in a downward spiral for over three years, has reignited discussions about Ethereum’s long-term value proposition and its role in the evolving cryptocurrency landscape.

This article delves into the specifics of the ETH/BTC ratio debate, exploring the arguments for and against Ethereum as an investment, and analyzes the potential implications for the future of the cryptocurrency.

The ETH/BTC Ratio’s Alarming Decline: A Sign of Weakening Relative Strength

The ETH/BTC ratio’s persistent decline, extending for over three years, has raised concerns about Ethereum’s ability to maintain its relative strength against Bitcoin. As Galaxy Digital’s Head of Research, Alex Thorn, aptly summarized, “Ether is down 74% against Bitcoin since switching from proof of work to proof of stake.”

This significant decline has fueled speculation about the underlying factors contributing to Ethereum’s underperformance. Some community members have even called for a return to proof-of-work (PoW), mirroring Bitcoin’s consensus mechanism, in the hope of bolstering Ethereum’s value.

However, shifting to PoW might not necessarily reverse the ETH/BTC ratio, considering the substantial changes in the cryptocurrency market since the merger to PoS.

The Investment Debate: Is Ethereum Worth the Bet?

The ETH/BTC ratio’s decline is part of a broader narrative on the investment merits of Ethereum. Macro-focused hedge fund VC Lekker Fund founder Quinn Thompson maintains that ETH is “not worth the investment.”

In a recent interview with Blockware Solutions, Thompson highlighted several factors contributing to his bearish outlook, including declining network activity, user growth, and fees/revenues.

While acknowledging Ethereum’s utility as a network, Thompson argues that its investment case is severely compromised by these declining metrics. He points to the network’s $225 billion market capitalization, which he believes is unsustainable given its current performance.

“If you look at the network activity, user growth, and the fact that they’re going down, and then you look at the market cap of $225 billion, to me, it doesn’t add up,” Thompson remarked.

He further noted that the ETH/BTC ratio has seen a double-digit decline during the 2023-2024 bull cycle, suggesting that the situation could worsen during a bear cycle.

“We’re in a bull market, and we’ve seen an 80% decline in the ETH/BTC ratio from the December 2024 highs. So, if you translate that to a bear market, I think we could see triple-digit declines in the ETH/BTC ratio.”

ETF Flows Show Stark Contrast Between BTC and ETH

The recent ETF flows have highlighted the diverging sentiment surrounding Bitcoin and Ethereum among institutional investors.

U.S. spot Bitcoin ETFs have recorded over $1 billion in inflows for 10 consecutive days (excluding one day), showcasing strong institutional demand for the world’s leading cryptocurrency.

Conversely, U.S. spot Ethereum ETFs have experienced consistent outflows since February 20, with over $400 million in outflows recorded in March alone.

This stark contrast in ETF flows underscores the prevailing negative sentiment among institutions, who are largely indifferent to the new products launched by Next New Fund and Bittrex Trust.

Despite the bleak outlook, speculators on prediction markets remain optimistic about Ethereum’s long-term prospects.

On Polymarket, bettors have set a 2025 price target of $4,000 for ETH, with the highest volume of bets placed on this particular level.

Option traders on Deribit are also anticipating a potential rise to $4,000 by September, albeit with a lower probability of 10%.

However, considering the current price of $1,870, down 54% from its December highs of $4,000, there’s a significant gap that needs to be closed.

The Underlying Concerns: Network Activity and Layer 2 Impact

The debate surrounding Ethereum’s investment potential centers on concerns about its network activity and the impact of Layer 2 (L2) solutions.

The decline in transaction activity, user growth, and fees/revenues suggests that Ethereum’s utility as a platform for decentralized applications may be waning. This decline raises questions about Ethereum’s ability to attract and retain users and developers.

Moreover, the rise of L2 solutions, designed to scale Ethereum’s transaction capacity, has been cited as a potential factor contributing to the weakness in ETH.

As L2s become increasingly efficient in handling transactions, they are effectively removing them from the Ethereum