Ethereum Faces Challenges as ETH/BTC Ratio Hits Lowest Point in Years

ETH/BTC Ratio Reaches Multi-Year Low

Ethereum (ETH), the second-largest cryptocurrency by market capitalization, is encountering significant challenges as its ETH/BTC ratio has dropped to 0.022, the lowest point since December 2020. This decline reflects a sharp downturn in Ethereum’s relative performance compared to Bitcoin (BTC). Since September 2022, when the ratio was around 0.085, Ethereum has lost over 73% of its value in comparison to Bitcoin. Currently, ETH is trading at approximately $1,880, down 9% over the past week and a staggering 62% from its all-time high of $4,890 recorded in November 2021. In contrast, Bitcoin’s price has seen a relatively modest decline of just 10% year-to-date, trading at around $84,300. The shrinking ETH/BTC ratio suggests that Ethereum is losing its grip on dominance in the smart contract and layer 1 (L1) ecosystem—an arena it once exclusively ruled. Competing layer 1 networks such as Solana (SOL), Binance Chain (BNB), and Avalanche (AVAX) have been gaining traction, while Bitcoin has been reasserting its dominance, leaving Ethereum struggling to keep pace.

Signs of Softening in Ethereum’s Metrics

As of April 1, 2025, Ethereum’s total value locked (TVL) stands at approximately $50.5 billion, making up 52.5% of the total market. This is a considerable decline from 61.64% in February 2024, indicating a gradual loss of market share within the decentralized finance (DeFi) sector. The emergence of competitors like Solana is evident, as its TVL has more than doubled from 2.84% to 7.24%, now totaling $6.69 billion.

Interestingly, user behavior trends demonstrate a shift: while Ethereum continues to attract users engaged in passive DeFi activities, such as yield farming and staking, Solana is capturing a more speculative audience. This shift suggests that Ethereum’s established use cases may not align with the current trends of retail investor activity.

Although Ethereum’s average gas fees have dropped significantly—and are now at just 1.12 GWEI—making transactions cheaper, the platform still encounters higher costs and slower transactions compared to newer blockchains, which can hamper its appeal, particularly to users executing smaller transactions.

Struggles with ETF Interest and Market Sentiment

Amid these shifts, the contrast in investor interest between Bitcoin and Ethereum has raised concerns. Bitcoin exchange-traded funds (ETFs) have amassed over $36 billion in net inflows, while Ethereum ETFs experienced a decline of 9.8% in net total flows in March 2025, resulting in a current total of $2.43 billion. This slowdown in interest reflects the deteriorating sentiment around Ethereum. In fact, short positioning in Ethereum surged by 40% in early February and has skyrocketed over 500% since November 2024—an unprecedented bearish trend in the market for this cryptocurrency.

With Ethereum’s overall market dominance dropping below 8.4%, a level not seen in more than four years, analysts are noting a significant outflow of capital from Ethereum towards alternatives including Bitcoin and emerging layer 1 platforms.

Scalability Challenges Persist

For years, scalability has been a vital pillar of Ethereum’s growth narrative. However, as of 2025, despite various protocol upgrades, Ethereum’s mainnet is still only capable of handling between 10 and 62 transactions per second, with an effective throughput of around 16 TPS. This starkly contrasts with Solana, which boasts a throughput of 4,322 TPS. The sluggish transactions on Ethereum are problematic for new users and applications, contributing to the growing tendency for developers to opt for alternative platforms.

The transition to a proof-of-stake consensus mechanism via the 2022 Merge has notably enhanced Ethereum’s energy efficiency. However, it has not resolved the underlying throughput limitations. Consequently, Ethereum has increasingly relied on layer-2 solutions—such as Arbitrum, Optimism, and Base—that allow transactions to be processed off the mainnet, although this has resulted in diminishing revenues from on-chain activity.

According to analysts, significant transaction fees that would traditionally benefit Ethereum’s mainnet are now being captured by these layer-2 networks—potentially diverting billions from Ethereum’s market cap and weakening its deflationary mechanics.

The Road Ahead: What Lies Ahead for Ethereum?

As Ethereum prepares for future upgrades, including Pectra, which aims to enhance layer-2 efficiency by increasing blob capacity, experts like Geoff Kendrick from Standard Chartered remain skeptical. Kendrick argues that such upgrades are unlikely to resolve the fundamental issues impacting the ETH/BTC ratio.

The drying activity on Ethereum’s mainnet, combined with shifts in user engagement towards layer-2 solutions, suggests a critical turning point for the platform. Investors now face pressing questions regarding Ethereum’s future in the rapidly evolving cryptocurrency landscape, particularly as it navigates increased competition and changing user preferences. As Ethereum grapples with these significant challenges, industry stakeholders will be closely monitoring whether it can reclaim its footing in the layer 1 blockchain space.

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