The price of Ethereum’s native token, Ether (ETH), is currently at a 15-month low compared to Bitcoin (BTC), which is also the lowest it has been since Ethereum switched to proof-of-stake (PoS). If you’re wondering whether this trend will continue for the rest of 2023, let’s examine the charts.
Ethereum price breaks critical support against Bitcoin
This week, the ETH/BTC pair fell as low as 0.056 BTC. This drop caused the pair to break below its 200-week exponential moving average (200-week EMA), which was around 0.058 BTC. As a result, there are increased risks of further downside in 2023.
Historically, the 200-week EMA has acted as a reliable support level for ETH/BTC bulls. For example, after testing this support in July 2022, the pair rebounded by 75% within three months. Conversely, when it lost this support in October 2020, it dropped over 25%.
With the loss of its 200-week EMA as support, ETH/BTC faces similar risks of a selloff in 2023. The next downside target appears to be around its 0.5 Fibonacci line near 0.051 BTC, which is approximately 9.5% lower than current price levels. However, if ETH reclaims the 200-week EMA as support, it may rebound towards its 50-week EMA near 0.065 BTC.
Bitcoin’s dominance overshadows Ethereum
The weakness of Ethereum compared to Bitcoin is also evident in institutional capital flow data. CoinShares reports that Bitcoin-specific investment funds have attracted $246 million year-to-date (YTD) as of October 6th, while Ethereum funds have experienced outflows of $104 million in the same period.
This discrepancy is likely due to the growing buzz surrounding a potential approval of a spot Bitcoin exchange-traded product (ETF) in the U.S. Experts believe that a spot Bitcoin ETF launch could attract $600 billion. Furthermore, Bitcoin’s fourth halving, scheduled for April 24, 2024, is also contributing to its dominance over the altcoin market.
The halving will reduce Bitcoin miners’ block reward from 6.25 BTC to 3.125 BTC. This event is historically seen as bullish because it cuts the new supply in half.
Hot Take: Ethereum Struggles Against Bitcoin as Institutional Capital Flows Favor BTC
Ethereum’s native token, Ether (ETH), has been experiencing a downward trend against Bitcoin (BTC), reaching a 15-month low and hitting its lowest point since the switch to proof-of-stake (PoS). The weakening of ETH can be seen in its failure to maintain support levels, such as the breach of the 200-week exponential moving average (EMA). This has increased downside risks for ETH/BTC going forward.
Additionally, institutional capital flow data reveals that Bitcoin-specific investment funds have attracted significant investments compared to outflows from Ethereum funds. The anticipation of a spot Bitcoin exchange-traded product (ETF) approval in the U.S. and Bitcoin’s upcoming halving are contributing factors to this dominance.
With Bitcoin’s halving set to cut new supply in half, it presents a bullish case for the cryptocurrency. As Ethereum struggles against Bitcoin, it remains to be seen how this dynamic will play out for the rest of 2023.
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