More than 19 months after Ethereum’s historic Merge upgrade, the data is clear: the network’s native asset, Ether (ETH), is not keeping up with Bitcoin (BTC).

The ETH/BTC price ratio tapped another three-year low on Thursday at 0.044, with Ether last experiencing less market dominance against Bitcoin in May of 2021.

Why Does ETH Keep Dumping Against BTC?

The trend has been offputting and confusing for Ethereum bulls, of whom many assumed ETH would become a more appetizing investment than Bitcoin following the September 2022 Merge.

At the time, the upgrade introduced a proof of stake consensus mechanism, and lowered ETH’s inflation rate by 90%.

Combined with Ethereum’s previously implemented transaction fee-burning mechanics, this meant ETH was now both an investment with intrinsic yield and a negative inflation rate – bullish properties that its older brother BTC did not possess.

Despite these qualities, ETH/BTC has fallen 45% since the Merge took place. This is especially noteworthy given that crypto has been in a general bull market for the past 18 months. During such times, altcoins are accustomed to outperforming BTC.

Joe McCann, the founder of crypto fund Asymmetric, tweeted on Wednesday that “the flippening” – a dream that the market cap of ETH might one day surpass that of BTC – “was always a dream that has turned into a nightmare.”

“Bitcoin is ‘ultrasound money’ and Solana is the “global supercomputer,” McCann argued. “Ethereum is neither.”

Experts at CryptoQuant argued that Ether is no longer “ultrasound money” since its Dencun upgrade took effect in March 2024. While lowering transaction fees for users, it also turned Ether into an inflationary currency again, hurting its investment thesis as a better store of value than Bitcoin.

Meanwhile, recent technical breakthroughs have allowed developers to bring applications to Bitcoin that were once unique to Ethereum and other more programmable chains.

These include Ordinals NFTs, Runes trading, and BitVM – a new framework for bringing smart contracts and trust-minimized layer 2 networks to the Bitcoin ecosystem.

After little more than one year since Ordinals gained traction, Bitcoin has already become a more popular chain for NFT trading than Ethereum, data from CryptoSlam shows.

ETH / BTC. Source: TradingView

Ethereum’s Regulatory Woes

Aside from technical concerns, Ethereum also faces major headwinds on the regulatory front.

While Bitcoin spot ETF products were approved in January, experts believe any imminent approval for an Ether spot ETF remains highly unlikely. Furthermore, most altcoins including Ether appear to be on the radar of the U.S. Securities and Exchange Commission, prompting legal trouble for against exchanges and other companies interacting with such assets.

We do think that as long as Gary Gensler chairs the SEC, any advancement in the digital-asset space is going to have to come through the judiciary channels, said Mark Connors, head of research at 3IQ, in an interview with MarketWatch.

Solana (SOL) is up a whopping 665% over the past year, compared to ETH’s 61% rise. Ether’s total crypto market dominance is now down to 15.1%, versus Bitcoin’s 54.5%, according to CoinMarketCap.