CryptoQuant Claims ETH Is ‘Severely Undervalued’ Against Bitcoin, Though Market Headwinds Persist

Ethereum is showing strong signs of being undervalued compared to Bitcoin, with the ETH/BTC ratio hitting levels that historically suggest Ethereum could outperform Bitcoin. However, the path to recovery for ETH may not be as clear-cut as past patterns, as rising supply, stagnant demand, and weaker burn mechanics complicate the outlook.

On-chain data from CryptoQuant reveals that the ETH/BTC market value to realized value (MVRV) ratio has dropped to multi-year lows, a level that often signals a potential rebound for ETH. The ETH/BTC ratio peaked above 0.08 in late 2021 but has since fallen by over 75%, now standing at just 0.019.

The MVRV ratio is a metric that compares a token’s current market capitalization to its realized capitalization, reflecting the average price at which the tokens were last moved. A lower MVRV ratio typically points to undervaluation, which could indicate an opportunity for outperformance. Historically, similar signals have led to rallies in Ethereum’s price.

Despite the historically bullish signal, the current market environment presents challenges. Ethereum’s network activity remains largely flat, with key metrics such as transaction counts and active addresses showing no meaningful growth since the last bull market. CryptoQuant noted that this lack of growth has persisted for over three years, raising concerns about Ethereum’s long-term adoption trajectory.

The rising total supply of Ethereum is another concern. While Ethereum’s network has seen a significant decrease in transaction fees burned—partly due to the Dencun upgrade in March 2024, which lowered fees—this reduction in burn activity diminishes the deflationary effects that once helped limit the token’s supply and support its price.

Moreover, the increasing adoption of Layer 2 solutions like Arbitrum and Base has resulted in more transactions occurring off the main Ethereum network. This has led to lower fees on the base layer, weakening Ethereum’s value accrual mechanism and further limiting demand for ETH.

Institutional interest in Ethereum is also showing signs of cooling. CryptoQuant highlighted a decline in the total amount of ETH staked, falling from a peak of 35.02 million ETH in November 2024 to approximately 34.4 million ETH. This suggests that institutional investors are becoming more cautious and reallocating capital elsewhere due to a less favorable market environment.

Furthermore, ETH balances in investment products such as ETFs have fallen by about 400,000 ETH since early February, reflecting a broader decline in institutional confidence in Ethereum.

Meanwhile, Bitcoin has continued to climb, recently nearing $100,000, as it solidifies its position as a safe-haven asset for investors amid a turbulent macroeconomic landscape.