Ethereum Bitcoin Underperformance Accelerates to 65% Since PoS Shift

Ether crashed 65% against Bitcoin since September 2022. That’s when Ethereum switched to Proof-of-Stake. The ethereum bitcoin underperformance gutted the “ultrasound money” narrative that drove bullish sentiment through 2021 and early 2022.

The thesis was simple: Ether would become scarcer than Bitcoin. EIP-1559 burned transaction fees starting August 2021. The Merge in September 2022 slashed new ETH issuance by roughly 90%. Combined, those two upgrades were supposed to make Ethereum deflationary over time.

Didn’t happen.

ETH supply averaged -0.19% annual deflation after the burn mechanism launched in 2021. But since the PoS switch in 2022, supply growth turned positive at 0.23% per year. Still better than Bitcoin’s current 0.85% inflation rate, but it’s not deflation. The promise broke.

**Why Ethereum Stopped Burning**

ETH only turns deflationary when mainnet activity burns more coins than validators earn. That condition weakened.

Transaction fees collapsed. Average Ethereum fee in March: $0.21. That’s down 54% from a year earlier. Lower fees mean less ETH burned per transaction.

Meanwhile, activity migrated to Layer 2 networks. L2beat data from March 7 shows rollups processing 926 user operations per second. Ethereum mainnet? Just 22.36 ops per second. L2s scale the network, but they gut the burn mechanism that made “ultrasound money” work.

The math is brutal. High fees drove deflation in 2021 during the NFT mania. Fees averaged $15-$30 per transaction. Now they’re under a quarter. The burn can’t keep up with validator issuance.

**Bitcoin’s Fixed Supply Wins**

The ethereum bitcoin underperformance stems from investor preference for predictability. Bitcoin’s 21 million coin cap never changes. The issuance schedule is fixed. No debate. No upgrades that alter supply.

Analyst Handre explained it: “Every scaling debate, every upgrade proposal, every attempt to change Bitcoin’s monetary policy has failed because the economic majority understands what they’re protecting.”

Ethereum doesn’t offer that certainty. Supply went deflationary, then inflationary again. The monetary policy shifted based on network usage patterns. Investors don’t trust that.

Handre added: “Every altcoin promises scarcity but delivers inflation by design. Ethereum abandoned its ‘ultrasound money’ narrative the moment it became inconvenient.”

I’ve seen this setup before. 2018. Altcoins promised revolutionary upgrades. Bitcoin just kept its 21 million cap. Bitcoin won that cycle too.

**ETF Flows Tell the Story**

U.S. spot Bitcoin ETFs hold $91.9 billion in assets as of March. Spot Ethereum ETFs? $12.1 billion. That’s a 7.6x difference.

Institutional capital chose Bitcoin. The ethereum bitcoin underperformance in ETF products mirrors the price action in ETH/BTC. When allocators compare the two, Bitcoin’s predictable supply schedule wins.

Ether never delivered a convincing dollar breakout either. The 2021 all-time high sat near $4,800. Between 2021 and 2026, ETH only marginally exceeded that level before losing momentum. Bitcoin doubled from its 2021 peak to the 2025 record high.

Reduced issuance alone doesn’t create demand. Ethereum proved that. You need sustained narrative conviction. The “ultrasound money” story collapsed when supply turned positive again.

**Insider Selling Pressure**

Vitalik Buterin and the Ethereum Foundation periodically sell ETH. That’s documented. Culper Research went short Ether specifically citing Buterin’s selling as a reason.

Public criticism from a research firm shorting your asset isn’t ideal. It amplified the view among traders that Ethereum insiders distribute into strength rather than accumulate for the long term.

I’ve traded through multiple cycles. Founder selling always pressures sentiment. Doesn’t matter if it’s “treasury management” or “funding development.” The market reads it as lack of conviction.

**What’s Driving the Ethereum Bitcoin Underperformance?**

Three factors converged:

First, broken deflation narrative. Supply went from -0.19% to +0.23% annual. The “ultrasound money” thesis died.

Second, Bitcoin’s monetary superiority. Fixed 21 million cap beats variable supply every cycle. Institutional allocators know this.

Third, reduced mainnet activity. L2s scale transactions but kill fee burn. Average fees at $0.21 can’t sustain deflation when validators earn new ETH every block.

The data tells a different story than the 2021 bullish pitch. Ethereum upgraded to PoS, reduced issuance, and still lost 65% against Bitcoin. That’s not a supply problem. It’s a demand problem.

**Technical Context**

ETH/BTC tested 0.025 in early 2025, the lowest level since April 2021. Every bounce failed. Support at 0.030 broke in late 2024 and never reclaimed.

The 200-week moving average on ETH/BTC sits at 0.045. Ether is trading 44% below that long-term average. This isn’t a correction. It’s a structural repricing.

Funding rates on ETH perpetual futures stayed near zero or slightly negative through most of Q1 2025. That means no leverage demand. Traders aren’t positioning for a comeback.

**What Happens Next**

The ethereum bitcoin underperformance continues until one of three things changes: mainnet fees surge (unlikely with L2 dominance), validator issuance gets cut (no proposal exists), or Ethereum delivers a narrative stronger than Bitcoin’s fixed supply (hard to imagine what that would be).

L2s won’t reverse course. They’re scaling Ethereum, which was the goal. But that kills the burn mechanism. Can’t have both.

Ethereum could implement another issuance reduction, but that requires consensus. The network already cut issuance by 90% at the Merge. Another cut faces resistance from validators who earn less.

Bitcoin doesn’t need upgrades to win. It just needs to keep the 21 million cap intact. Ethereum keeps changing. Bitcoin stays the same.

Question is whether ETH/BTC finds a floor near 0.020 or tests lower. Past cycles bottomed between 0.015-0.025 before multi-year recoveries. But those recoveries happened when Ethereum had a compelling upgrade narrative.

Right now, Ethereum has L2 scaling. That’s important for usability. Not for price.

All eyes on 0.020.