According to Steno Research, Ethereum’s (ETH) days of underperformance against the wider crypto market might be numbered following the US Federal Reserve’s (Fed) decision to cut interest rates.

Regarding price appreciation, ETH hasn’t had a particularly impressive 2024. While Bitcoin (BTC) and altcoins like Solana (SOL) and Tron (TRX) have witnessed considerable price gains, ETH is still trading at its January 2024 price levels.

Notably, the second largest digital asset by market cap has tumbled 48% against Bitcoin since the Ethereum merged on September 15, 2022.

For the uninitiated, the Ethereum merge was a major milestone for the leading smart contract platform as it not only changed its consensus mechanism from Proof-of-Work (PoW) to Proof-of-Stake (PoS) but also razed down the issuance of new ETH from 4% to 1% annually.

As a result, there has been a net negative ETH supply growth with more ETH being burned through transaction fees than issued to stakers.

Ethereum’s unimpressive performance against Bitcoin can be confirmed from the following chart, where the ETH/BTC trading pair has fallen to 0.04, eroding all its gains against the flagship cryptocurrency since April 2021. However, a recent report by Steno Research opines that it’s time for Ethereum to come back. 

According to the report, the Fed’s decision to slash interest rates might be the fuel that propels ETH’s price surge in the coming months. The report references ETH’s performance during the last altcoin season, where it more than doubled in value compared to BTC in less than two months. 

This sudden growth was powered by a sharp increase in on-chain activity stemming from rising interest in ecosystems such as decentralized finance (DeFi), non-fungible tokens (NFT), and higher issuance of stablecoins. In a post on X, Mads Eberhardt, Senior Cryptocurrency Analyst at Steno Research, said:

Lower interest rates -> More on-chain activity -> Greater Ethereum transactional revenue -> Lower ETH supply growth -> Higher ETH price. Let’s go.

Additionally, the report mentions that Ethereum exchange-traded funds (ETFs) will likely outperform Bitcoin ETFs. Discussing the major reasons why BTC has overshadowed ETH until now, Eberhardt notes:

The impact of U.S. spot ETFs for both bitcoin and ether, the persistent buying pressure from MicroStrategy (MSTR), and a notable decline in Ethereum’s transactional revenue in recent months.

Despite the headwinds it has faced, investor confidence in Ethereum continues to be strong. In a recent report, crypto exchange Bitwise’s CIO called Ethereum the ‘Microsoft of blockchains’, hinting it might come back by year-end after the November US presidential elections. ETH trades at $2,543 at press time, up 4.3% in the past 24 hours.

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