The price of Ethereum’s native token, Ether (ETH), has reached a 15-month low against Bitcoin (BTC), marking the lowest point since Ethereum shifted to proof-of-stake (PoS). In this article, we will explore the reasons behind the continuous drop in the ETH/BTC pair and the potential impact on Ethereum’s performance.
Historically, Ethereum has often outperformed BTC during bullish market trends. However, this trend began to change at the beginning of 2023. Ethereum and other altcoins faced challenges as the narrative surrounding their use within Web3, DeFi, and NFTs came under pressure in 2022 and 2023. Additionally, stringent regulations against the crypto industry, decreased inflows from retail and institutional investors, and a rise in investors seeking refuge in US-dollar-pegged stablecoins also affected sentiment for Ethereum.
Another factor that negatively impacted ETH was the steady increase in Bitcoin dominance. Bitcoin’s market dominance rose to 54%, its highest level in the last 30 months, indicating the strengthening of the top cryptocurrency just before the halving event scheduled for April 2024. Bitcoin dominance measures BTC’s market capitalization relative to the overall crypto market and is often used by investors as a sentiment gauge. With the Bitcoin halving approaching and investors’ belief in the imminent launch of a spot BTC ETF, the decline in Ether’s value in its BTC pair suggests that investors are more bullish on BTC and may be allocating less money to Ether investments.
The ETH/BTC pair dropped to 0.050 BTC on October 23 and has remained in a downtrend since then. Notably, the pair fell below its 200-week exponential moving average near 0.058 BTC, which increases the possibility of further downside in the short-term. The 200-week EMA has historically served as a reliable support level for ETH/BTC bulls. For example, the pair rebounded by 75% three months after testing the support in July 2022 but dropped over 25% after losing the same support in October 2020.
These factors are expected to continue impacting Ethereum’s price relative to Bitcoin. The multifaceted market dynamics, investor sentiment, and strict regulatory environment are likely to remain dominant headwinds against the ETH/BTC pair in the foreseeable future.
It is important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers are encouraged to conduct their own research before making any decisions.