Since 2022, the ETH/BTC ratio has been on a structurally declining trend.
Many observers blame this issue on the “Merge” (The Merge) completed by Ethereum in July 2022, believing that the transition to Proof of Stake (PoS) not only failed to bring the anticipated growth momentum but also weakened Ethereum’s value performance.
However, Eric Wall, co-founder of Taproot Wizards, presents a different perspective.
He argues that the real reason for ETH’s weak performance relative to BTC is not a single technological upgrade event but rather broader macro-societal changes, shifts in capital flows, and deep changes in the technological ecosystem. Eric Wall specifically identifies several core reasons for Ethereum’s decline.
1. Shift in Social Values: “From startup nerds in unicorn T-shirts back to a Bronze Age mentality.”
The mainstream values in capital markets and social culture are shifting from “elitism, utopian Web3 ideals” to “hard assets, pragmatic strategies, and survival first.” This shift benefits Bitcoin (as a “hard asset, war currency”) while harming ETH (symbolizing more idealistic, technology-driven assets).
2. Increased Competition in ETH’s Domain
Ethereum’s role is that of a “smart contract platform.” However, this field inherently attracts competitors: various L1s such as Solana, Avalanche, Near, Sui, and Move can challenge it. In contrast, Bitcoin’s positioning as “digital gold” has almost no direct competitors, resembling a winner-take-all structure. Thus, even if ETH is technically advanced, it is more susceptible to dilution and erosion, unlike BTC, which has formed a monopolistic structure.
3. L2 Disrupted the ETH-Centric Narrative and Fragmented Network Effects
The L2 scaling route has indeed improved system efficiency, but it has weakened the purity of ETH in capturing capital value.
4. Lack of Super Buyers Similar to Saylor for ETH
Bitcoin has super institutional buyers like Michael Saylor (CEO of MicroStrategy) who continuously and publicly increase their holdings, creating a strong “institutional accumulation story.” ETH lacks buyers of this scale and brand effect. Even when institutions adopt ETH, their impact and publicity are far inferior to Bitcoin.
5. Bitcoin and Gold Transformed into “War Assets” for Hedging, While ETH Remains a “Peace Asset”
In the context of global geopolitical tensions (such as US-China confrontation, the Russia-Ukraine war, and the weaponization of the dollar), Bitcoin and gold are increasingly viewed as “hedging assets” or “preservation assets in wartime.” In contrast, Ethereum is seen as a symbol of “innovation” and “technological advancement,” attributes that lack appeal in the current market environment.
6. Compared to AI, ETH No Longer Appears as “Smart or Futuristic”
AI aligns more closely with the market imagination of “futuristic,” “smart,” and “high-tech” than cryptocurrencies (especially technology-narrative assets like ETH). The preferred “hot money for technological innovation” is flowing towards AI rather than focusing on the Ethereum ecosystem.
7. Stagnation in the Ethereum Ecosystem, with DeFi Innovation Falling Significantly Below Expectations
In the past two years, there have been very few truly revolutionary new DeFi protocols. The innovative ecosystem of Ethereum has stagnated, with mainstream applications still limited to the most basic forms such as exchanges (DEX), lending, and stablecoins.