Why Efirium lags so far behind Bitcoin in terms of profitability: Kaiko platform analysts’ answer
On September 18, the U.S. Federal Reserve cut the economy’s benchmark lending rate by 50 basis points or 0.5 percent, easing pressure on the economy and giving crypto investors reason to hope for a continued bullrun. Since then, Bitcoin’s value has risen 14 per cent. Efirium, on the other hand, has risen less in value over that period – the altcoin still lags noticeably behind the major cryptocurrency in terms of profitability. According to analysts at Kaiko Research, a set of these factors points to slower adoption of Efirium among major investors.
This is what the changes in the value of Efirium in 2024 looks like. As you can see, the cryptocurrency has fallen in price by 15 per cent in the last six months.
Changes in the exchange rate of Etherium ETH in 2024
At the same time, Bitcoin has risen in price by 5 per cent over this period. Yes, and in the scale of the year, the increase in the rate of the first cryptocurrency outpaced ETH more than twice.
Changes in the rate of Bitcoin BTC in 2024
Taking into account what is happening, the ratio of the rate of ETH to BTC is at a minimum from 2021. That is, in this time frame, the first cryptocurrency was generally the best investment.
Weekly chart of the Efirium exchange rate against Bitcoin
The local BTC rally was driven by an influx of new capital into spot ETFs, as well as optimism about further rate cuts itself.
For example, Bitcoin-based exchange traded funds attracted net inflows of $2.13 billion last week. ETFs on Efirium, meanwhile, have seen inflows in the tens of millions.
Why isn’t Efirium growing in value?
Kaiko Research experts note the persistent gap between the yields of BTC and ETH, explaining it by the advantage of the former in the eyes of institutional investors. In particular, analysts referred to the fact that the volume of open positions on Bitcoin futures on the CME exchange reached record highs the previous day.
At the same time, Efirium futures remain relatively unpopular, indicating what is happening with demand for the digital asset. Here’s a rejoinder on the matter.
Demand for Efirium has also been sluggish on the spot. In October, Efirium lagged behind most altcoins in terms of trading volume. The volume gap between ETH and the top fifty altcoins widened to the highest level since March.
This means that altcoins are attracting far more investor interest than ETH. And it's not surprising, as the value of Efirium has risen by just 16 per cent since the start of the year, while many large meme tokens on the Solana network and other blockchains have fetched holders several Xs.
Bitcoin exchange rate rises since US Fed officials cut rate
Bitwise’s head of research in Europe, Andre Dragosz, noted that capital flows on the Etherium blockchain also continue to lag behind those for Bitcoin.
In other words, institutional interest in ETH remains low, and without that, there will be no meaningful trend reversal in favour of this ecosystem. Here’s his comment.
To sustainably grow the value of Efirium, we will need a massive reversal in capital flows on the blockchain like the one that occurred in mid-2021.
According to The Block’s sources, ETH hit an all-time high of $4,878 on 10 November 2021, while Bitcoin peaked at the $69,000 line.
Since then, BTC set a new record in March 2024, but ETH never managed to surpass the record highs in terms of value. What’s more, Bitcoin is now just 8 per cent off its all-time high rate, while Efirium is 45 per cent below the high.
The record and low of the Efirium exchange rate recorded on the Coingecko platform
Meanwhile, the Efirium ecosystem is evolving in terms of fundamental improvements, among other things. For example, earlier the creator of the altcoin Vitalik Buterin published curious proposals on his blog regarding further steps in the roadmap of the project’s development.
In particular, he stated that the target throughput of this network should be 100 thousand transactions per second. However, this level also takes into account the second-level chains based on Efirium on the Base type.
Unfortunately, all of the above will not give a proper boost to the exchange rate in the short term, says Coinbase analyst David Duong.
The updates do not directly affect the interests of Efirium holders in how the altcoin is able to maintain its appeal as a leading platform for smart contracts by providing a wider range of applications. Thus the impact on the coin’s price is broadly neutral. Currently, we expect the dynamics to depend more on factors such as the outcome of the US presidential election.
The benchmark credit rate in the US
Solana as one of the most promising new ecosystems is so far keeping a normal growth rate, promising investors a rally by the end of 2024. Still, the SOL rate has jumped 478 per cent in the past year.
According to Ryan Lee, chief analyst at Bitget Research, such changes in the dynamics of the digital asset market can be explained by the growing liquidity of stablecoins, whose capitalisation has reached a record $160 billion. This surge in liquidity indicates significant purchasing power, which could drive altcoin growth.
As sentiment improves, we may see altcoins benefit from this influx of liquidity.
However, Efirium still needs more triggers to start a new rally. The more altcoin lags behind Bitcoin on a number of metrics, the harder it is for the big players to form any basis on the chart for a new phase of growth, experts say.
The significant lag of ETH in terms of profitability from BTC is not the best news for this cryptocurrency. Still, Bitcoin is traditionally considered a conservative asset within the blockchain industry, which is suitable for those wishing to get not the most serious profit without significant risks. And since Ether is not able to reach the first line in terms of profitability, it will affect the interest of users in the coin's ecosystem itself.
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