The Impact of Tech Stocks on Ether Price: A Closer Look
The performance of tech stocks is closely monitored in the crypto community, and according to CME Group, movements in the tech-heavy Nasdaq 100 have a greater impact on the price of ether compared to bitcoin. Erik Norland, a senior economist at CME Group, explains that on days when tech stocks rally, the exchange rate between ether and bitcoin (ETHBTC) tends to rise as ether benefits more than bitcoin.
Key Points:
- Ethereum’s practical applications through its smart contract network contribute to its higher sensitivity to tech stock movements.
- Bitcoin is primarily used as a volatile store of value and hedge against fiat devaluation, whereas ether has more practical use cases.
- Despite both cryptocurrencies being known for their price volatility, the exchange rate between them has shown relative stability compared to their individual price swings.
- When bitcoin rises, ether tends to rise even more, and when bitcoin falls, ether tends to fall to a greater degree.
- There is a close relationship between the prices of bitcoin and ether, with a correlation of around 0.85 over the past year.
The Influence of the U.S. Dollar and Bitcoin Supply
In addition to tech stocks, the report highlights the impact of the U.S. dollar and changes in bitcoin supply on ether’s price. Ether appears to be more sensitive to swings in the U.S. dollar, and the ETHBTC rate reacts more strongly to changes in bitcoin supply than ether supply. Norland notes that a stronger USD has a more negative effect on ether than it does on bitcoin.
Key Points:
- The ETHBTC rate shows near-zero correlation to interest rates, gold, and crude oil futures.
- Ether’s supply tends to rise after price increases relative to bitcoin, indicating that ETH supply responds to price rather than driving it.
- If bitcoin rallies ahead of its upcoming halving in April 2024, it may further boost ether prices relative to bitcoin.
Hot Take
The price of ether is not only influenced by the overall crypto market and movements in bitcoin, but also by the performance of tech stocks and the U.S. dollar. As ether’s practical applications continue to expand, its sensitivity to these factors becomes more pronounced. Understanding these dynamics can help crypto investors better anticipate and navigate price movements in the market.
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