If you’ve been checking your portfolio lately, you’ve probably noticed something a bit depressing if you’re an Ether fan. Bitcoin is pushing toward that psychological six-figure $100,000 mark, while Ethereum seems stuck in the mud, barely scraping past its 2024 levels.
It feels off.
For years, the "flippening"—the moment Ethereum overtakes Bitcoin in market cap—was treated like an inevitability by the DeFi crowd. Instead, the gap is widening. In late 2025, Bitcoin’s dominance remains a juggernaut at over 55%, while Ethereum’s share of the market has drifted. Honestly, if you're asking why is ethereum lagging bitcoin, you aren't alone. Wall Street is asking it, developers are asking it, and retail traders are definitely venting about it on X.
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The reality is that Ethereum isn't "broken." It’s actually doing exactly what it was designed to do. But that’s exactly the problem for the price of ETH.
The ETF Elephant in the Room
When the spot Bitcoin ETFs launched in early 2024, they were an instant hit. BlackRock’s IBIT became the fastest-growing ETF in history. When the Ethereum ETFs finally arrived in July 2024, everyone expected a similar "moon mission."
It didn't happen.
The institutional appetite for ETH has been... lukewarm. While Bitcoin is pitched to pension funds as "digital gold"—a simple, scarce store of value—Ethereum is a much harder sell. You have to explain smart contracts, gas fees, and the "world computer" thesis. Most wealth advisors don't want to explain why a network upgrade might change the yield structure of an asset; they just want a hedge against inflation.
Data from late 2025 shows a massive divergence. Bitcoin ETFs have seen billions in steady inflows, while Ethereum ETFs have struggled with inconsistent demand. Part of this is the "staking" issue. Because the SEC initially blocked ETFs from staking their ETH to earn rewards, institutional investors feel like they’re leaving 3-4% yield on the table. Why buy an ETH ETF when you can just buy BTC and get a cleaner "store of value" narrative?
The Layer 2 Cannibalization Problem
This is the part that catches most people off guard. Ethereum is a victim of its own success.
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To solve high fees, Ethereum moved its activity to "Layer 2" networks like Base, Arbitrum, and Optimism. It worked. Transactions are now incredibly cheap for users. But there’s a catch: these L2s are so efficient that they aren't "burning" enough ETH to keep the supply in check.
- Mainnet Revenue: Ethereum’s mainnet revenue dropped from over $2.5 billion in early 2024 to roughly $600 million by late 2025.
- Fee Retention: Networks like Coinbase’s Base capture about 90% of the fees they generate, sending only a tiny fraction back to the Ethereum mainnet.
- Supply Inflation: Because fewer fees are being burned on the main layer, ETH has occasionally turned inflationary again.
Bitcoin doesn't have this problem. Bitcoin is simple. Its scarcity is hard-coded and unaffected by how many people use the Lightning Network. Ethereum’s value is tied to the economic activity of its base layer, and right now, that activity has moved to the "suburbs" (Layer 2s) where the taxes are lower.
Bitcoin is the "Safe Haven" in a Volatile World
Macroeconomics plays a bigger role than most crypto-natives want to admit. We've seen a lot of global uncertainty lately—tariffs, election cycles, and shifting interest rates. In those environments, investors run to safety.
In the crypto world, safety means Bitcoin.
Ethereum is often viewed as a "high-beta" play on Bitcoin. This means when Bitcoin goes up, Ethereum is supposed to go up more. But that correlation broke in 2025. When markets get shaky, traders sell their "altcoins" (and yes, many institutions still group ETH with altcoins) and move back into the "Gold Standard" of the space.
The Fragmentation of Mindshare
Solana. That’s a name that keeps Ethereum developers up at night.
In the last cycle, Ethereum was the only game in town for DeFi and NFTs. Now? Solana has captured a massive chunk of the retail "meme coin" volume. It’s faster, it’s one single chain (no jumping between L2s), and it’s where the "degen" energy is.
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Ethereum’s roadmap, led by Vitalik Buterin, is focused on long-term decentralization and "protocol hardening." It’s noble. It’s technically superior. But it’s not particularly "exciting" for someone looking to flip a token for a 10x gain. This fragmentation—the fact that Ethereum’s liquidity is split across dozens of different L2s—makes the user experience feel clunky compared to the unified experience of Bitcoin or Solana.
Is the Trend Reversible?
It's not all doom and gloom. Ethereum is still the king of "Real World Assets" (RWAs). If a major bank like JPMorgan or BlackRock wants to tokenize a fund, they aren't doing it on a meme-heavy chain. They’re doing it on Ethereum because of its security and longevity.
Actually, as of early 2026, Ethereum hosts over 65% of all tokenized assets globally. That’s a trillion-dollar industry in the making.
What you can do next:
If you're holding ETH and wondering if you should jump ship, look at the Pectra upgrade metrics and the L2-to-L1 fee settlement ratios. If Ethereum can find a way to "capture" the value being generated on Base and Arbitrum more effectively, the supply will start shrinking again. Until then, Bitcoin’s "Digital Gold" narrative is simply easier for the world to digest.
Keep an eye on the ETH/BTC exchange rate. Historically, when this ratio hits extreme lows (around 0.035 to 0.04), it has signaled a massive bounce. We're currently testing those levels, making it a high-stakes moment for anyone betting on an Ethereum comeback.