The value of Ethereum in relation to Bitcoin has reached a low that hasn’t been seen in over a year. Let’s consider which factors have affected the weakening of the ETH/BTC currency pair recently.
Ethereum, represented by its native token – Ether (ETH), has recently seen a significant drop in value compared to Bitcoin (BTC). Moreover, we observe the lowest level since Ethereum switched to a Proof-of-Stake system.
Let’s take a closer look at the reasons for the continuous decline in the value of the ETH/BTC pair:
Volatility of Ether’s historical price.
In previous market cycles, Ethereum often outperformed BTC during bull runs. However, this relationship began to change in early 2023. Ether, along with many other cryptocurrencies, struggled when the narrative about using altcoins in Web3, DeFi, and NFTs came under pressure in 2022 and 2023. Stricter regulations against the cryptocurrency industry and reduced inflow of retail and institutional investments significantly affected Ethereum’s perception.
Increase in Bitcoin dominance
In addition to the change in Ether’s performance against BTC, ETH’s value has been negatively affected by the steady rise in Bitcoin dominance. According to reports, Bitcoin’s market dominance reached 54%, the highest level in the last 30 months. This indicates that Bitcoin, being the leading cryptocurrency, is gaining strength, especially just before the upcoming block reward halving event scheduled for April 2024. Bitcoin dominance, measuring BTC’s market capitalization in relation to the entire cryptocurrency market, is often used by investors as a market sentiment indicator. In the context of the upcoming Bitcoin halving and investors’ belief in the imminent debut of a BTC-based exchange-traded fund (ETF), Ether’s value drop against BTC suggests that investors are more bullish on BTC.
Drop in Ethereum’s price below a key support level against Bitcoin.
The ETH/BTC pair reached a value of 0.050 BTC on October 23 and has been in a downward trend since then. It’s noteworthy that the pair exceeded its 200-week exponential moving average around 0.058 BTC, increasing the likelihood of further declines in the short term.
The factors mentioned are likely to continue to affect the price of Ethereum in relation to Bitcoin. Complex market dynamics, investor sentiment, and a stringent regulatory environment may pose major challenges for the ETH/BTC pair in the near future.
Photo by Pierre Borthiry – Peiobty on Unsplash
