- Ethereum has historically outperformed Bitcoin in bull markets
- Pattern reversed to start the year as Bitcoin gains dominance
- Analyst Dan Ashmore examines history to show how and why patterns are changing
It’s flipping. Nothing inspires more discussion within crypto circles.
Browse scenarios ethereum flip Bitcoin Flippenning, which topped the cryptocurrency rankings, ranges from inevitable to delusional, depending on who you ask.
I don’t want to walk around the eggshell of that discussion because I’m afraid of Twitter DMs, but today while digging into the data for Ethereum and Bitcoin, I noticed something rather interesting.
Ethereum has a strong correlation with Bitcoin
First, it’s clear. Ethereum is incredibly correlated with Bitcoin. Because it is a cryptocurrency and the fate of all crypto is tied to the fate of the orange coin. we know this by now.
The graph below shows how close this relationship has been since Ethereum’s revival in 2015.
But while these two best buddies are chasing each other across the price charts, they also have slightly different scenarios. His famous ETH/BTC ratio is one that Ether fans especially pay attention to.
After peaking near 0.15 in June 2017, it dropped to 0.025 by the end of the year. Today it is trading around 0.07.
Ether outperforms Bitcoin in a bull market
You may have noticed that the previous ETH/BTC chart resembled the shape of the entire crypto market through many ups and downs.
We plotted Bitcoin price against this ETH/BTC ratio. In fact, as Bitcoin rises, falls, and Bitcoin falls, this ratio rises. Using Bitcoin’s price as a proxy for the industry as a whole, this suggests that the ETH/BTC ratio will rise in bull markets and fall in bear markets.
Meaningful. Bitcoin is often referred to as Boomercoin. By the way, I like it a lot, even though it is meant as an insult. But compared to altcoins, Bitcoin behaves like a pensioner in a bull market, so it’s an understandable moniker.
Ether may be the biggest altcoin, but it has outperformed Bitcoin in bull markets.
Conversely, Bitcoin will outperform when the party ends. Outperforming means tending to fall 60% instead of 70%. But hey, we’ll save that for another day.
Pattern reversal in 2023
But the price chart shows something different. A month into the new year, Bitcoin surged while the ratio of ETH and BTC dropped. This is the exact opposite of what happened historically.
I graphed this ratio going back to the beginning of November. fun and games was released to the world, cryptocurrencies fell, and Bitcoin plummeted to $16,000.
The chart shows that the pattern remains as expected. But when you turn the page in 2023, The crypto market has turned upside down And Bitcoin soared. The only problem is that ETH did not follow suit. He has fallen from 0.077 on Jan. 11 to 0.068 today, even though Bitcoin surged from $17,400 to nearly $23,000 over the same period.
why? I honestly don’t know. Abnormal.
Bitcoin is up 36% over the year, while Ether is up only 29%. But looking at the returns of other altcoins, it probably has nothing to do with Ether. Many have been outperformed by Bitcoin, but even those that have outperformed are not as good as we’ve seen before (note that we’ve removed Solana for scaling purposes. thinned out (by Sam Bankman-Fried and links to multiple projects that fled blockchain late last year).
In fact, this is just Bitcoin’s remarkable rise from the depths of bear market pain. The rest of the market is not ready to forget Armageddon 2022, with many altcoins down 90% or more of him.
Ethereum didn’t do too badly, but it still fell from an all-time high near $5,000. Pandemic grants and stimulus packages are over. It’s a different climate now, and starting an altcoin hype is proving to be more difficult.
The web3 story has reached a dead end. NFT has collapsed. There is no doubt that the narrative around ETH has collapsed.I wrote about the method of institutional adoption Undo In crypto and how long it takes for the sector’s reputation to be corrected.
That also applies to Bitcoin. Perhaps that’s even more true of ETH and altcoins, which have to do even more to regain investor confidence.