Summary:
Ethereum’s market dominance has dropped to 13%.
Bitcoin has gained more than 120% YoY, outperforming Ethereum.
Whale selling activity is impacting Ethereum's market position.
Weak demand for ETH ETFs has led to significant outflows.
Ethereum’s annual inflation rate recently reached 18%, raising supply concerns.
Ethereum’s market dominance has dropped to range lows at 13%. The declining market share comes amid weakening demand, rising supply, and Bitcoin’s rising dominance.
Ethereum has been underperforming against Bitcoin over the past year. For example, Bitcoin has gained more than 120% year-on-year (YoY), while Ethereum's growth is around 50%. At present, Ethereum's market dominance stands at 13.85%, a significant drop from a yearly high of nearly 20%.
Bitcoin’s Rising Dominance
Bitcoin has seen a significant increase in its dominance this year, forming higher highs and moving within an ascending channel. A key factor for Bitcoin's rise is the high demand for spot Bitcoin exchange-traded funds (ETFs), with current holdings exceeding $57 billion worth of BTC, demonstrating substantial institutional interest.
Whales Are Selling Ethereum
A contributing factor to Ethereum's declining dominance is whale selling activity. Recently, a large address from the 2014 ICO deposited 5,000 ETH to Kraken, valued at approximately $12M. In total, this whale has deposited around 50,000 ETH worth $125M to exchanges in the last two weeks. Additionally, the Ethereum Foundation has sold more than $10M worth of ETH this year, further impacting Ethereum's performance.
Weak Demand for ETH ETFs
Unlike Bitcoin, Ethereum has recorded low demand for its spot ETFs. Since their launch in July, these ETFs have seen $849M in outflows. The Grayscale Ethereum Trust has been a significant contributor to this, with both the BlackRock spot ETH ETF and the Fidelity Ethereum Fund showing no positive inflows recently.
Rising Supply
Ethereum is facing challenges with a declining burn rate, resulting in an inflationary trend. In the past month, over 43,000 ETH tokens have been added to the circulating supply, with an annual inflation rate recently reaching 18%, the highest since August.
The lack of new demand to absorb this increasing supply may increase sell-side pressure on Ethereum, causing it to lose market share to Bitcoin and other altcoins. Ethereum's falling dominance is also contributing to weakening market sentiment, as most traders are bearish on Ethereum, while institutions remain bullish.
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