The price of the native ethereum token (ETH) is trading around 15-month low against Bitcoin (BTC), the lowest price since ethereum switched to proof-of-stake (PoS).
Historical ETH price action has changed
In previous market cycles, Ethereum often outperformed Bitcoin during bullish market trends, but this relationship began to change in early 2023. Ether and numerous altcoins struggled as the Web3, DeFi and NFT altcoin use story came under pressure in 2022 and 2023.
Tight regulation of the crypto industry, significantly dampened inflows from both retail and institutional investors, and an increase in investors seeking shelter in stablecoins pegged to the US dollar also influenced sentiment for Ethereum.
Bitcoin’s dominance is growing
In addition to the change in the performance of Ether in its pair with BTC, ETH has been negatively affected by the continued rise in dominance of Bitcoin. As reported by Cointelegraph:
Bitcoin’s market dominance reached 54%, the most in 30 months, indicating that the top cryptocurrency is strengthening ahead of the April 2024 halving event.
Bitcoin Dominance is a measure of Bitcoin’s market capitalization relative to the overall crypto market and highlights the asset’s strength. Investors often use this as a gauge of sentiment. With the Bitcoin halving fast approaching (April 2024) and investors believing that a spot BTC ETF is on the way, the drop in value ether in his Bitcoin pair suggests that investors are feeling more bullish on BTC and may be allocating less money to Ether.
Ethereum price falls below critical support against BTC
The ETH/BTC pair dropped to 0.050 BTC on October 23 and has remained in a downtrend since then. A notable event was the pair’s drop below its 200-week exponential moving average near 0.058 BTC, raising the possibility of further downside in the short term. Yashu Gola notes:
The 200-week EMA has historically served as a reliable support level for ETH/BTC bulls. For example, the pair returned 75% three months after testing wave support in July 2022. Conversely, after losing the same support in October 2020, it fell more than 25%.
These factors will likely continue to influence the price of Ethereum relative to Bitcoin. Multifaceted market dynamics, investor sentiment, and an unwavering regulatory environment could remain the dominant headwinds against the ETH/BTC pair for the foreseeable future.