The price of Ether (ETH) was 173% higher than Bitcoin (BTC) from March 28 to May 15. The incredible rise in price caused the token to hit an all-time high of $ 4,380. However, when the crypto market started falling on May 12th, the trend began to reverse and since then Ether has underperformed by 25%.

Some might say this is a technical correction after a strong rally. While this partially explains the move, it rules out several key factors, including the rapid advancement of rivals in the smart contract network and the first-time use of Bitcoin as a currency.

Notice how the ETH / BTC ratio rebounded on June 8th to hit 0.77, although the price of Ether is still 36% below its all-time high and hovering near $ 2,800. To understand what could have been driving this rate, analysts need to analyze the price drivers of Ether and Bitcoin separately.

Mike Novogratz may have been misinterpreted in his interview

Ether’s rally is likely to take another big step as it has been praised by institutional investors. Traders may have recognized the sense of urgency known as FOMO and quickly shifted their Bitcoin exposure to the top altcoin.

On May 13th, New York magazine published an interview with Mike Novogratz, founder and CEO of Galaxy Digital. During the conversation Novogratz said:

“Suddenly on Ethereum you have decentralized finance and fast-growing NFTs almost at the same time.”

Novogratz was then asked how much higher ether could reach and he replied:

“You know, predicting heights is very dangerous. But can it go as high as $ 5,000? Of course possible. “

While Ethereum holders may interpret this as a prediction, others may interpret it as a myth, possibly depending on general crypto market conditions.

However, about a week later, a report from Goldman Sachs revealed that the global investment bank believes ether “has a high chance of overtaking Bitcoin as the dominant store of value.” Interestingly, one of the report’s key quotes comes straight from Novogratz’s interview with the New Yorker.

At its peak, Binance Chain controlled 40% of DEX volume khối

While Ethereum still holds the dominant position of 80% in terms of net worth in decentralized financial applications (DeFi), Binance Smart Chain (BSC) has achieved a 40% market share on DEX exchanges.

The successful development of the DeFi industry and the non-fungible token (NFT) market resulted in severe congestion on the Ethereum network and increased the average fee to $ 37 by mid-May. This congestion has triggered an operational migration to competing networks, and PancakeSwap is best placed to capture this flow.

Connected: Here’s why one analyst says Bitcoin will outperform Ethereum in the short term

To make matters worse, major DeFi projects have expanded to Binance Smart Chain, including the profit aggregator Harvest Finance and the 1inch decentralized exchange aggregator. Investors quickly realized that this trend could continue as the competing smart contract network offers a simple solution for dApps looking for cheaper alternatives.

No country adopts the “Ethereum standard”

Bitcoin may have underperformed in the past 30 days as it failed to break the USD 42,000 resistance multiple times. However, an important milestone was reached when El Salvador became the first country to introduce legal tender for Bitcoin on June 12th.

After the Central American country instituted the decision, several other Central and South American countries began to discuss the benefits of a similar path.

Ethereum is undergoing a redesign that will change spending rates and the way companies are paid to secure the network by moving away from the proof of work model. Meanwhile, Bitcoin ensures that every upgrade is backwards compatible and maintains its strict monetary policy.

This is the main reason Ether won’t outperform Bitcoin for the next 12 months, or at least until there is a better understanding of what the dominance of the Ethereum network over smart contracts will be.

Professional investors avoid uncertainty at all costs and the cryptocurrency market already has a lot of that. There’s no reason for institutional investors to ignore risk while competing networks eat Ethereum’s lunch.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your own research when making a decision.