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Ether-Bitcoin Ratio Drops to Lowest Since April 2021. Here’s Why It Matters

Sep 15, 2024
    The ETH/BTC ratio has hit its lowest since April 2021, dipping below 0.04, signaling a decline in investor interest in ether relative to bitcoin.The preference has swung towards bitcoin, which was influenced by the introduction of bitcoin ETFs, which saw significant inflows compared to ether ETFs experiencing net outflows.Some traders say this shift indicates a broader market favoring bitcoin’s perceived stability over ether’s riskier, high-yield potential.Analysts suggest the ETH/BTC ratio might drop further, potentially to the 0.02-0.03 range, unless there’s a significant change in investor sentiment or regulatory clarity that might favor riskier assets like altcoins.
As a seasoned analyst with over two decades of experience in the financial markets, I’ve witnessed numerous market cycles and seen countless trends come and go. The current state of the ETH/BTC ratio has certainly piqued my interest.The ETH-to-BTC price comparison ratio, which is often monitored, has reached its lowest point since last year’s April, suggesting decreased interest among investors for the world’s second-biggest cryptocurrency, Ether.
The ether-bitcoin trading pair fell under 0.04 late Sunday to trade at 0.039 in European morning hours Monday, extending year-to-date losses to nearly 30%. Although colloquially called a ratio – ETH/BTC is simply the trading pair of ether against bitcoin on crypto exchanges, which attracts hundreds of millions in daily volumes.
For the past five years, the value of Ethereum (ETH) compared to Bitcoin (BTC) has significantly increased. It started at 0.02 and reached a high of over 0.08 in early 2022. This means that during this period, Ethereum was four times more valuable than Bitcoin when compared.

Since hitting new record highs in U.S. dollars in April (before dropping by 20%), the value proposition of bitcoin has been on a downward trend. Meanwhile, ether has yet to surpass its 2021 peaks and is currently 52% lower than its highest point in that year. In terms of return on investment so far this year, bitcoin has provided over 40%, whereas ether holders have only seen a modest 1% gain.

Ether-Bitcoin Ratio Drops to Lowest Since April 2021. Here’s Why It Matters

A spike suggests that Ether is outperforming Bitcoin, while a decline implies Bitcoin is preferred. When markets rise, investors see a favorable bias towards Ether and investments in the Ethereum ecosystem as advantageous for riskier assets. Conversely, a downward trend indicates a preference for Bitcoin and other blockchains apart from Ethereum.

As a crypto investor, I’ve noticed an interesting trend: In 2023, the demand for Ether compared to Bitcoin seemed to reach its peak. Following this, the introduction of spot Exchange-Traded Funds (ETFs) appeared to shift the playing field in favor of Bitcoin.

In an email to CoinDesk, FxPro senior analyst Alex Kuptsikevich explained that Ethereum’s long-term growth has primarily been due to the efforts of its developers, including improvements to the blockchain and expansion of its surrounding ecosystem. However, by the end of 2023, Bitcoin began to outshine Ethereum as the potential launch of exchange-traded ETFs garnered attention.

As an analyst, I should point out that the introduction of Ethereum-based ETFs hasn’t sparked the same level of buying interest, leading to a net decrease in assets under management, and it hasn’t managed to halt the ongoing decline in the ratio, either.

Since their launch at the end of July, Ether Exchange-Traded Funds (ETFs) have experienced a total outflow of approximately $580 million. Contrastingly, Bitcoin ETFs accumulated more than $12 billion within their first two months and have since seen over $17 billion in inflows during the span of slightly over eight months of trading.

Other factors, such as technical elements and the potential for higher returns on alternative blockchain platforms, may have played a role in reducing the demand for Ethereum, according to some perspectives.

In simpler terms, as the return on staking Ethereum (ETH) remains relatively low at about 3% per year, it’s being surpassed by the returns from staking stablecoins and trading other cryptocurrencies like TON which offer higher yields, according to Nick Ruck, a crypto market researcher.
In simpler terms, “Ruck stated that Bitcoin (BTC) has performed robustly within its price range. On September 13th, Bitcoin spot ETFs experienced their most significant inflow in the last two weeks, which enhances BTC’s appeal compared to Ethereum (ETH).
Currently, traders like Kuptsikevich foresee more hardships for individuals who are wagering on the ETH/BTC ratio, suggesting potential difficulties in the near future.

The possibility exists for this ratio to drop even lower, within 0.02-0.03 boundaries. This is unexpected considering the optimistic investor outlook towards altcoins following Bitcoin’s halving a few months ago, and the fact that altcoins have shown a higher sensitivity to the stock market in recent times,” he pointed out.

Investors might be holding off, expecting clearer details about upcoming monetary and policy changes. A consistent upward trend could persuade them to aim for greater profits and accept the risk of investing in alternative cryptocurrencies, as suggested by Kuptsikevich.

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2024-09-16 15:43