CryptoQuant: Ether’s Price Compared to Bitcoin Indicates ETH Is ‘Massively Undervalued,’ But Obstacles Persist

The Ethereum market appears to be deeply undervalued relative to Bitcoin, according to the latest data, which could signal a potential rally for ETH. However, several key factors—rising supply, stagnant demand, and weakened network mechanics—are complicating the outlook for Ethereum’s price recovery.

CryptoQuant’s analysis of the ETH/BTC ratio shows that it has dropped to multi-year lows, with the market value to realized value (MVRV) ratio now hovering at levels that have historically indicated periods of ETH outperformance against Bitcoin. The ETH/BTC ratio reached a high of 0.08 in late 2021, but it has since plummeted by over 75%, standing at just 0.019 at press time.

The MVRV ratio, which compares a token’s current market capitalization to its realized capitalization (the price at which the token last moved on the blockchain), reveals that Ethereum is currently trading below its long-term average. While such signals have historically been associated with bullish periods for ETH, the situation this time appears more complex.

Ethereum’s network activity has been lackluster, with key usage metrics like transaction volumes and active addresses showing little to no growth since the last market surge. CryptoQuant attributes this stagnation to a lack of sustained expansion in Ethereum’s core usage and an increase in ETH’s total supply, which has grown in tandem with the declining amount of ETH burned.

The Dencun upgrade, implemented in March 2024, reduced transaction fees across the network, but it also led to a significant reduction in the burning of ETH, a mechanism that previously helped limit supply. This shift, while beneficial for reducing user costs, has lessened the scarcity effect that traditionally supported ETH’s price.

Additionally, the rise of Layer 2 solutions, such as Arbitrum and Base, has shifted activity away from Ethereum’s mainnet, further reducing base-layer transaction fees and weakening the demand for ETH as a store of value. The increase in Layer 2 usage may dilute Ethereum’s narrative as the main platform for decentralized applications and decentralized finance (DeFi).

On top of these supply and demand challenges, institutional interest in Ethereum is cooling. CryptoQuant noted a decrease in the amount of ETH being staked, from a peak of 35.02 million ETH in November 2024 to around 34.4 million ETH today. This decline reflects a broader trend of reduced institutional confidence in ETH, as evidenced by falling holdings in ETFs and other investment vehicles.

The total amount of ETH held in institutional products has dropped by approximately 400,000 ETH since early February, signaling that large investors are pulling back as the market conditions remain uncertain.

In contrast, Bitcoin has continued to gain momentum, recently approaching the $100,000 mark, as it increasingly attracts investors seeking safety in a turbulent macroeconomic environment.