Why did Ethereum completely defeat Bitcoin in the past year?

When Bitcoin breaks through historical highs driven by the US ETF, Ethereum seems to be struggling.

We all know there was a market unwritten rule: the ETH/BTC exchange rate generally stays around 0.05. If it exceeds this number, it might mean BTC is about to rise or ETH is about to fall, and vice versa. However, since last year, this situation has changed. Bitcoin has continuously hit new highs, reaching 110,000, while Ethereum's weak performance goes without saying. As of now, the exchange rate between the two has basically dropped from 0.05 to around 0.02.

Meanwhile, what is Ethereum's founder Vitalik doing in the face of such dismal ETH performance? Teaching a robot to meow, which has caused dissatisfaction across the internet.

But if we analyze rationally, Vitalik's actions are actually not directly related to the network's reaction. If ETH performed well, people would only say he is cute. To put it bluntly, it's just that ETH has fallen too hard, and people's emotions need a vent.

In-depth analysis reveals why ETH has completely failed against BTC; behind this lies the fundamental survival rule of the cryptocurrency market: the selling pressure from early profit-takers is the ultimate variable determining the long-term trend of assets.

Comparison of early profit-takers in Bitcoin and Ethereum

If we compare Bitcoin and Ethereum to two gold mines, Bitcoin miners have long disappeared into the annals of history with the first batch of gold, while the sound of pickaxes still echoes in Ethereum's mine. The "magic" of Bitcoin lies in its completion of the most thorough "de-profitization" in human financial history—Satoshi Nakamoto's 1.1 million BTC has remained untouched for 14 years, and the 3 million BTC mined by early Chinese miners have mostly flowed into the hands of long-term holders in Europe and America after several rounds of policy reshuffling.

More critically, at least 4 million BTC have permanently exited circulation due to lost private keys, hardware damage, and other reasons. This means that 14%-19% of Bitcoin's total supply has completely evaporated from the market, and the actual selling pressure in circulation is far lower than the paper data suggests. This self-purification ability has allowed Bitcoin to gradually transform into true "digital gold"—without a founding team, no pre-mining, no interest groups, only pure value storage supported by global consensus.

In contrast, Ethereum was born with a heavy historical burden. When the mainnet launched in 2015, 72 million ETH were allocated to the foundation and early investors, with the cost of these tokens being nearly zero. Even today, there are still 1.6 million "Genesis ETH" lying in original addresses, like a Damocles sword hanging over their heads. When the price of ETH rises to certain satisfactory heights, these zero-cost chips could potentially unleash nuclear-level selling pressure at any moment.

What’s more troublesome is that Ethereum has undergone two large-scale wealth creation movements: during the 2016 ICO frenzy, project teams acquired ETH at almost zero cost, with peak monthly selling volumes exceeding 500,000; the 2021 DeFi Summer gave rise to a new group of vested interests, with Uniswap airdrop recipients once selling $300 million worth of ETH in a single day.

After Ethereum transitioned to a PoS mechanism, the problem not only did not ease but instead buried new hidden dangers. The PoS mechanism means that Ethereum validation nodes do not need any hardware investment; as long as they stake their ETH in the network, they can continuously produce new ETH as rewards. Approximately 1,800 ETH are produced daily (annual inflation rate of 0.3%), and these nearly zero-cost "new chips" continuously enter the market, creating dual selling pressure alongside early profit-takers.

In contrast, Bitcoin PoW miners need to pay high electricity costs, forcing them to continuously sell BTC to cover operational expenses, thus achieving a continuous clearing of profit-takers. This difference is particularly evident in bear markets—when the market is in liquidity exhaustion, zero-cost holders often choose to "lie flat," while miners' selling pressure accelerates the market's bottoming out.

Historical cases confirm the cruelty of this rule. Dogecoin and Litecoin, two "three-no products" (no technology, no ecosystem, no application), can maintain a long-term position in the top 20 by market cap precisely because their early profit-takers have fully exchanged hands. Dogecoin founder Billy Markus cleared out in 2015, while the top ten addresses of Litecoin only account for 4% of the circulating supply, with holdings being highly dispersed.

In contrast, EOS, despite once claiming to be the "Ethereum killer," saw the Block.one team holding 100 million tokens, and continuous selling by nodes led to its market cap dropping out of the top 50. BCH, although it replicated Bitcoin's "dead coin" characteristics, has been unable to escape the shadow of selling pressure due to infighting between the development team and miners.

For investors, this game reveals two iron rules: first, the price of any asset is ultimately determined by the supply and demand of its circulating supply, not its total market cap; second, the ultimate test of token economics is the thoroughness of "de-profitization." Current favorites like Solana and other new public chains also face challenges—early VC and team tokens will gradually unlock over the next 2-3 years, and only when these chips have fully exchanged hands can they truly challenge Ethereum's position.

The deepest lesson from the crypto market is that technology can iterate, ecosystems can be rebuilt, but the human impulse to take profits can never be eradicated. Bitcoin has completed the most spectacular asset "purification" in human history over 14 years, while Ethereum is undergoing a similar rebirth. Currently, the ETH/BTC exchange rate has dropped to 0.02, and I expect this number to go even lower. However, some see despair, while others see opportunity—perhaps only when the last early profit-taker leaves the table will the true value game begin.

(Risk Warning: The tokens mentioned in this article are highly volatile; please do not blindly follow trends.)