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Ethereum’s market value responds less to investment inflows than Bitcoin. In the US, the first process of spot Ethereum exchange-traded funds began on July 23, with inflows exceeding $100 million. While positive flows indicate a strong start for the funds, Ethereum may not witness the parabolic rise that Bitcoin experienced after asset managers launched ETF funds earlier this year.
What’s Happening with Ethereum and Bitcoin?
CryptoQuant’s latest weekly crypto report explains that new money inflows into crypto asset products like ETF funds will have a weaker impact on Ethereum than Bitcoin due to the networks’ distinct multiplier effects. According to analysts, Ethereum’s multiplier is lower than Bitcoin’s and remained low in 2024. The multiplier highlights the rate of change in market value, meaning Ethereum’s market value responds less to new investment inflows.
For every $1 of fresh money invested in Bitcoin, the asset’s market value increased by $5, but Ethereum’s market value increased by $1.34 for every $1 invested. The CryptoQuant report further outlines other factors that could hinder Ethereum’s growth following the ETF launch, one of which is Ethereum’s increasing supply.
Since Ethereum developers implemented the Dencun upgrade on the network in March, Ethereum’s supply has been increasing. Dencun introduced a mechanism that allows for data bundles and significantly reduces transaction fees; lower transaction fees have translated into a decrease in burned Ethereum.
Details on the Subject
Before Dencun, Ethereum implemented upgrades that kept the network deflationary by burning a portion of transaction fees. Since Dencun, Ethereum’s supply has been increasing at a high rate, the fastest since The Merge in September 2022. At the time of writing, Ethereum’s total and circulating supply was 120.22 million, but it had no maximum supply. In contrast, Bitcoin has a supply limit of 21 million.
Analysts stated that the structural change in Ethereum’s monetary policy has caused the network to lose its ultra-sound money narrative. The ultra-sound concept argues that Ethereum has the potential to be more robust than Bitcoin by using features that preserve its purchasing power and reduce its supply over time.
Although Ethereum’s price appears to have bottomed out and indicators point to positive momentum, the asset’s spot trading volume on centralized exchanges still needs to be considered. Since January, Ethereum’s spot volume has been 85% of Bitcoin’s during the same period and 58% of the leading cryptocurrency since 2020.
