The price of Ethereum’s native token, Ether (ETH), is currently trading at a 15-month low compared to Bitcoin (BTC), marking the lowest level since Ethereum switched to proof-of-stake (PoS). This significant drop in the ETH/BTC pair has raised concerns and prompted a closer examination into the reasons behind this continuous decline.
Historically, Ethereum has often outperformed BTC during bullish market trends. However, this relationship began to change at the start of 2023. In recent years, Ether and numerous altcoins have struggled as the narrative around their use within Web3, DeFi, and NFTs has come under pressure. Additionally, stringent regulations against the crypto industry, muted inflows from retail and institutional investors, and an increase in investors seeking shelter in US-dollar-pegged stablecoins have all contributed to the negative sentiment surrounding Ethereum.
Furthermore, ETH has been negatively impacted by the steady rise in Bitcoin dominance. Bitcoin dominance refers to BTC’s market capitalization relative to the overall crypto market. This dominance has reached 54%, its highest level in the last 30 months, indicating that BTC is strengthening just before the halving event scheduled for April 2024. Investors often use Bitcoin dominance as a sentiment gauge, and the recent drop in Ether’s value in its BTC pair suggests that investors are feeling more bullish about BTC and potentially 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. This decline is notable because the pair fell below its 200-week exponential moving average (EMA) near 0.058 BTC. Historically, the 200-week EMA has served as a reliable support level for ETH/BTC bulls. For example, in July 2022, the pair rebounded 75% three months after testing this support level. Conversely, in October 2020, it dropped more than 25% after losing the same support. Therefore, the fall below the 200-week EMA raises the possibility of further downside in the short-term for the ETH/BTC pair.
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Various factors are likely to continue impacting Ethereum’s price relative to Bitcoin. The complex market dynamics, investor sentiment, and the stringent regulatory environment are expected to remain significant headwinds against the ETH/BTC pair in the foreseeable future.
It is important to note that this article does not contain investment advice or recommendations. Whenever making investment or trading decisions, it is crucial for readers to conduct their own research and carefully analyze the risks involved.
