Since Ethereum's transition to proof-of-stake in September 2022, known as the Merge, it was anticipated to revolutionize its network by enhancing energy efficiency and turning ETH into a deflationary asset. Contrary to expectations, Ethereum has seen a dramatic 70% decline against Bitcoin, raising significant concerns about its future market position.Impact of Global Trade Dynamics and Internal FactorsThe ongoing US-China trade war and general market volatility have exacerbated the situation, with Ethereum's supply growth rate stalling around 0%, indicating that the expected deflationary impact of the Merge has not materialized as planned. This is evident from data on UltraSound.Money, which showed a mere -0.37% supply rate at its peak in April 2024.Whale Movements and Market SentimentSignificant Ethereum holders have been reducing their stakes, with on-chain data from Alphractal showing a notable decrease in wallets holding large amounts of ETH. This trend reflects a growing lack of confidence among long-term holders and could be contributing to Ethereum's underperformance.Competition from SolanaAdding to Ethereum's challenges, Solana has emerged as a formidable competitor, capturing a substantial share of the DeFi and NFT market that traditionally belonged to Ethereum. This shift has been partly driven by innovative platforms like the Pump.fun memecoin launchpad, which has recently outpaced Ethereum in daily transaction volume.Technical Analysis and Market ProjectionsDespite the current bearish trend, the ETH/BTC pair is now in an oversold territory according to the Relative Strength Index (RSI), trading near a historical support area. This setting suggests a potential relief rally could be imminent, offering a chance for Ethereum to regain some of its lost ground against Bitcoin.However, Ethereum's long-term outlook remains bearish, with potential further declines if it breaks below critical support levels. This situation necessitates a close monitoring of market dynamics and internal developments within the Ethereum network to better understand its potential recovery paths.Ethereum's Path to RecoveryFor Ethereum to recapture its previous highs and stabilize its market standing, it will need to increase blockchain activity and drive broader adoption. Only through these measures can Ethereum hope to challenge Bitcoin's dominance and reclaim its position as a leading blockchain platform, according to Cointelegraph.
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