4 top reasons why Bitcoin is "lagging behind" Ethereum right now

The crypto market is witnessing a remarkable shift: Ethereum has officially surpassed Bitcoin in the volume of perpetual futures trading, reaching a dominance level of 67% – the highest of all time. This is not just a mere technical signal, but also reflects the shift in capital flows, risk appetite, and the confidence of both speculators and institutional investors in the altcoin ecosystem, with ETH emerging as a new center.

The shift from Bitcoin to Ethereum

For many years, Bitcoin has been considered the center of the derivatives market, where most liquidity and speculative activity revolves around "digital gold." The trading volume of BTC's (perpetual futures) usually dominates absolutely, reflecting its dominant role not only in the spot market but also in the derivatives sector. However, the latest data from Glassnode indicates a pivotal change: Ethereum has surpassed Bitcoin and is rapidly widening the gap, a rare phenomenon in market history.

Source: GlassnodeThis cannot be considered a coincidence. Ethereum has long been regarded by the community as a "barometer" for altcoin cycles. Whenever ETH shows superiority over BTC, the market often enters a phase of widespread growth, where capital flows out of Bitcoin in search of opportunities in higher-risk assets with greater profit potential. The fact that ETH futures trading volume accounts for up to 67% of the total market – a historical record – accurately reflects this shift.

In other words, Ethereum is not only reclaiming its position from Bitcoin on the derivatives exchange, but is also becoming a representation of the new risk appetite of investors. This rise opens up an important possibility: altcoins may have entered the launch phase for a new growth cycle, with ETH playing the role of the "locomotive" leading the flow of capital and market sentiment.

OI: Affirmation Indicator of Trend

If the volume of perpetual futures trading reflects the intensity of speculative activities, then the open interest (OI) provides a more sustainable perspective, as it represents the total number of contracts currently existing in the market. Recent data shows that the open interest of Ethereum has risen to 43.3%, significantly narrowing the gap with Bitcoin – which currently holds 56.7%. This is a major step forward compared to the beginning of the year when ETH was still considered a "supplementary" asset rather than an investment choice alongside BTC.

Source: GlassnodeWhat is more noteworthy is that the trend is not limited to Ethereum alone. The total OI of leading altcoins like ETH, Solana, XRP, and Dogecoin once reached 60.2 billion USD, a new record, before adjusting down by 2.6 billion USD – which belongs to the group of the ten largest declines in history. This volatility reflects two aspects: on one hand, the altcoin market is in a sensitive state, easily reacting strongly to large capital flows; on the other hand, it also proves that altcoins today are no longer on the sidelines, but have become an important pillar in the structure of the derivatives market.

From a strategic perspective, the OI of ETH continuing to grow in parallel with the volume of transactions indicates that investors are not only seeking short-term profits, but are also willing to maintain longer-term positions. This further reinforces the argument that Ethereum is emerging as a true counterpart to Bitcoin, while paving the way for the scenario where altcoin becomes the main driving force in the next phase of the market cycle.

Source: Glassnode## Institutional capital flow: The driving force behind the rise of ETH

The recent surge in Ethereum is not only driven by speculative activity in the derivatives market but is also strongly propelled by institutional capital – a factor that is considered a "sustainable catalyst" for major trends. According to the latest report from JPMorgan, in July alone, Ethereum ETF funds attracted a net inflow of up to 5.4 billion USD, matching Bitcoin ETF funds in size for the first time. This is a symbolic milestone, indicating that Ethereum is entering a phase where interest from financial institutions is no longer inferior to that of BTC.

Notably, the developments in August further highlight the differences: while Bitcoin ETFs have begun to experience slight capital outflows, Ethereum ETFs continue to maintain a steady influx of capital. This divergence reflects the reality that institutional confidence in ETH is currently more sustainable, and investment funds no longer view ETH merely as a supplementary asset alongside BTC, but as a strategic channel that requires long-term allocation.

Alongside the flow of capital, legal factors are also providing significant momentum. The passage of the GENIUS Act in the United States – a new legal framework for stablecoins – marks an important turning point, as it directly reinforces trust in Ethereum as a core infrastructure platform for DeFi and decentralized financial applications. This is a key differentiator compared to Bitcoin: while BTC is primarily viewed as a store of value, ETH is placed at the center of an entire ecosystem of practical applications.

Not stopping there, the market is directing attention to the comprehensive crypto regulation bill expected to be announced in September. If implemented as hoped, this legal framework will not only strengthen transparency and safety for institutional investors but could also make Ethereum the most advantaged asset, thanks to its role as the technological infrastructure for decentralized financial products and the tokenization of traditional assets.

Why does Ethereum have an advantage over Bitcoin?

Ethereum's supremacy in the current phase is not a temporary result, but is reinforced by several fundamental factors. JPMorgan has identified four key drivers that help ETH gain a distinct advantage over Bitcoin.

First of all, the staking capability in ETFs is seen as a potential turning point. If the U.S. Securities and Exchange Commission (SEC) approves, spot Ethereum ETFs could integrate staking features, allowing investors to earn passive rewards without directly owning 32 ETH to operate a validator. This would make ETH ETFs a product that both stores assets and generates yields – an advantage that Bitcoin cannot have.

Secondly, the presence of ETH on corporate balance sheets is becoming increasingly evident. Currently, there are about 10 publicly listed companies holding Ethereum, accounting for 2.3% of the circulating supply. Notably, some businesses are not merely holding ETH as a reserve asset, but are also directly participating in staking to earn yield, or leveraging DeFi solutions to optimize cash flow. This is a significant difference from Bitcoin, which is often held by companies merely as a form of "digital gold."

The third factor relates to the legal framework for liquidity staking. Although there has not been an official statement, the SEC has sent an unofficial signal that liquidity staking products are unlikely to be classified as securities. This message, while more of a "legal sociology" nature than binding, has helped alleviate the biggest concern of institutions when considering allocating capital to Ethereum.

Finally, the physical-backed ETF redemption mechanism – applicable to both Bitcoin and Ethereum – brings a special advantage for ETH. Allowing investors to buy and sell ETF certificates using crypto assets instead of cash not only minimizes costs and increases efficiency, but also prevents the risk of mass sell-offs during strong capital withdrawals. With Ethereum, this is even more crucial due to the liquidity tied to the vast DeFi ecosystem, where institutional capital flows can be efficiently rotated instead of being forced to convert to fiat.

In summary, all four of these factors have created a structural advantage for Ethereum: it is both a yield-generating investment asset and widely accepted in enterprises, it has increasingly clear legal protection, and it possesses a more optimal ETF mechanism. This is the foundation for ETH to rise up to compete directly, even challenging the status that has been considered "invulnerable" for Bitcoin.

Ethereum still has a lot of room for development

Although Bitcoin still holds its symbolic role and is the "original asset" in the portfolio of most institutions, JPMorgan's analysis shows that Ethereum has much more room for growth. Three key factors – the rapid expansion of ETF funds, an increasing number of businesses adding ETH to their balance sheets, and a more transparent regulatory environment – are forming a solid foundation for Ethereum to become the focal point for capital inflows in the upcoming period.

ETH price chart 1 day | Source: TradingViewIf this trend continues, Ethereum has the potential not only to lead a new "altcoin season" but also to directly challenge Bitcoin's long-standing dominance, especially on two fronts: the derivatives market and institutional capital flow. These are areas that significantly influence market structure, where the movement of capital often signals new growth cycles.

In the perpetual futures market, Ethereum's dominance is not merely a short-term phenomenon. It clearly reflects a shift in the strategies of speculators, confirming that both institutional capital and the legal framework are on the side of ETH. As the cryptocurrency market enters a new cycle, Ethereum is gradually becoming the central factor: no longer just the "king of altcoins" signaling trends, but the main driving force shaping the development trajectory of the entire market.

Lilly