Why has Ethereum's price performance been significantly worse than Bitcoin's over the past year?
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Why has Ethereum's price performance been significantly worse than Bitcoin's over the past year?
The fundamentals are still there, just need patience and wait for the early profit-taking positions to be cleared out.
Navigating Web3 tides with focused insightsAuthor: Lightning HSL
A friend lost a significant amount while managing funds using a strategy of wbtc-eth-lptoken mining, which eventually hit the stop-loss level with a 50% drawdown after half a year.
After two weeks of reflection, I asked: why has ETH underperformed BTC so drastically?
Let me state the conclusion first:
Bitcoin’s early profit-takers (especially initial miners) have been completely cleared out. Satoshi's 1.1 million BTC remain dormant in their address, and it's estimated that similar "dead coins" like Satoshi’s account total over 2 million BTC permanently lost.
Multiple data analytics firms estimate that between 3 to 4 million BTC are lost—approximately 14%-19% of the 21 million cap.
ETH does not have this condition.
At genesis, 72 million ETH were issued to the foundation and ICO investors. Of these 72 million, about 1.6 million ETH (2.3% of current supply) remain un-cleared.
Compared to today’s price, these genesis coins can essentially be considered zero-cost.
PoW mining starting in 2015 awarded 5 ETH per block. During the 2016 ICO boom, an estimated 10 million ETH were mined at extremely low cost.
In the 2016 ICO wave, many project teams also accumulated nearly zero-cost holdings.
The DeFi summer beginning in 2020 created another large pool of potential sell-side pressure.
I don’t have the capacity to quantify these figures precisely—even ChatGPT Pro at $200/month couldn’t clarify this for me.
But by rough estimation: BTC has 14%-19% of early supply locked vs ETH’s 2%-5% (of 120 million total, 2.4 to 6 million early-profit ETH remain unturned).
Millions of ETH in potential sell pressure is a massive number. A single large on-chain transfer from an early miner terrifies the market, immediately picked up and amplified by various on-chain monitoring accounts.
Over the past decade, BTC has undergone thorough, large-scale turnover. Before 2017, most miners were Chinese; before 2021, Chinese exchanges dominated trading volume. Both facts suggest heavy Chinese ownership—but after multiple government crackdowns, those coins were ultimately acquired by Western (mainly American) investors.
Compared to BTC, ETH’s turnover has clearly been insufficient. The selling pressure from early ETH holders remains too high. This might be the fundamental reason behind ETH/BTC’s persistent decline over the past year.
Why did ETH/BTC surge significantly in 2016 and 2020? Because ETH introduced major innovations then, while BTC did not.
But during last year’s ETF bull run, both assets saw nearly equal policy advantages—BTC slightly stronger. Thus, the difference in early profit-holder pressure became the decisive factor in their price divergence.
Comparing DOGE, LTC, BCH, and EOS provides supporting evidence.
DOGE and LTC founders fully sold out—their holdings are highly decentralized. Despite lacking technology, ecosystem, or real applications, their prices haven't crashed badly, remaining within CMC Top 20.
BCH similarly copied BTC’s ledger, meaning its early 3–4 million BCH are dead coins, greatly reducing sell pressure—hence its ability to stay in the Top 20.
PoW mining involves hardware and electricity costs, incentivizing miners to sell rewards promptly. PoS mining incurs near-zero cost, encouraging accumulation before eventual dumping. Thus, during downturns, PoW coins tend to outperform PoS ones, as PoW miners clear profits early without accumulating risk, whereas PoS stakers accumulate larger future risks.
Take EOS: even though the community locked Block.One’s 100 million genesis tokens, DPoS node mining still left massive early profit-holders active. The resulting sell pressure caused its price to drop straight into CMC Top 50.
Over the past decade+, any coin consistently staying in Top 20 either had solid fundamentals—real usage, users, capital—or had cleared early profit-takers, or was a heavily manipulated asset (e.g., XRP).
If the above conclusions hold, what implications or opportunities arise?
First, no need to FUD ETH—its fundamentals remain intact. Just wait patiently for early profit-takers to exit. Prices may retrace further, but patient investors can still profit.
No need to overly fear SOL overtaking ETH. Wait until SOL’s early profit-takers are cleared. I believe any "ETH killer" must first eliminate its own early profit-holders before challenging ETH.
When investing in crypto, assessing holding decentralization is crucial.
Patience is required. Just wait.
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