Three Factors Driving Ethereum to Outperform Bitcoin

Crypto markets have gained more than 9% over the past week, sending total capitalization back over the $1 trillion level again.

Some crypto assets have performed better than others, and Ethereum has been making more gains than its big brother over the past seven days. During the rally, which began on Oct. 25, Ethereum gained 17% to current levels. Bitcoin, however, only managed to make 6% over the same period.

Institutional asset manager Grayscale stated that it could be to do with Ethereum supply growth in a Nov. 1 market report.

“From a fundamental perspective, ETH’s slowing supply growth post-merge has been a partial driver to outperformance relative to BTC.”

Reduced Selling Pressure

Before the Merge, Ethereum miners had to sell the asset to cover their expenses, just as Bitcoin miners do. But since the network transitioned to proof-of-stake in mid-September, that selling pressure has been vastly reduced.

“Without the constraint of miner sell pressure, ETH’s price is now potentially more exposed to larger positive movements,” Grayscale noted.

Another aspect of Ethereum’s attraction is its reduced supply issuance. The report noted that since the Merge, the issuance of the second-largest crypto has decreased by around 14,000 ETH per day or around 5 million fewer per year.

According to the Ultrasound.Money tracker, Ethereum supply growth is currently just 0.09% per year. This has switched to a negative or deflationary growth several times recently when network demand increases and more ETH is being burnt than is being produced. This makes it, at least on theory, a very attractive long-term hold asset.

Furthermore, the Merge reduced its energy consumption by 99.9%, making the asset much more appealing to ESG (environmental, social, and governance) conscious corporates and institutions.

According to the Digiconomist Ethereum Energy Consumption Index, the energy consumption dropped from around 84 TW/h (terawatt hours) per year before the Merge to just 0.01 TW/h today.

These three factors have made Ethereum a more promising prospect which has been evidenced in its recent performance versus Bitcoin.

Ethereum Price Outlook

ETH prices have gained 1% on the day to reach $1,585 at the time of writing, according to CoinGecko. The asset reached its highest price since mid-September on Oct. 29, tapping $1,645, but it failed to move any higher.

Ethereum is up 24% over the past month, but zooming out shows that it is still range-bound as it has been since May. ETH is currently down 67.6% from its November 2021 all-time high, which is also slightly better than Bitcoin’s drop.