Ethereum ETH/USD investors might want to enjoy the current rally, but it may be short-lived, according to a new report by 10x Research.
What Happened: Despite a recent rebound in the Ethereum/Bitcoin ratio, the analysts warn that this could be another bear market rally rather than a sustained recovery, with underlying fundamentals remaining weak.
Since the Ethereum Merge in September 2022, the Ethereum/Bitcoin ratio has plummeted by 37%, marking a sharp downtrend.
The ratio has consistently encountered resistance at the upper boundary of its descending channel, finding support near the lower edge.
However, the recent uptick is likely driven by short covering ahead of this week’s U.S. Consumer Price Index (CPI) data release, rather than any fundamental shift in the market.
“Ethereum has turned inflationary since April this year, with more ETH being issued than burned. Fundamentally, Ethereum remains in a bear market, and there are no clear signs that it will sustainably outperform Bitcoin BTC/USD soon,” the report states.
Ethereum developers continue to work on scaling solutions, focusing on rollups and other upgrades aimed at boosting efficiency and user experience.
Also Read: Bitcoin Long-Term Holders Have Been Accumulating In July, Analysts Report
However, these efforts have yet to translate into significant price gains.
“Previous upgrades, such as the Merge and Dencun, have had minimal impact on Ether’s price,” the report notes. Instead, macroeconomic factors like inflation have had a more substantial influence on Ethereum’s value.
The report also highlights the challenges facing Ethereum spot ETFs, which have experienced net outflows totaling $400 million.
In contrast, Bitcoin spot ETFs saw $1.4 billion in net inflows within 15 days of their launch.
This disparity reiterates the continued dominance of Bitcoin in the institutional market and raises questions about Ethereum’s long-term viability as a competitive asset.
“Without the potential for outsized returns, these factors may discourage Wall Street from fully committing to Ethereum,” the report cautions. “Enjoy this short-covering rally while it lasts.”
What’s Next: The future of Ethereum and broader digital assets will be a key topic of discussion at Benzinga’s Future of Digital Assets event on Nov. 19, where industry leaders will explore the evolving dynamics of the cryptocurrency market.
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