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

https://www.coindesk.com/news-analysis/2024/09/16/ether-bitcoin-ratio-drops-to-lowest-since-april-2021-heres-why-it-matters/

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.

A closely watched ratio tracking the relative price strength of ether (ETH) against bitcoin (BTC) has dropped to its lowest level since April 2021, indicative of a fallout in investor demand for the world’s second-largest token. 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.

Over the past five years, the ETH/BTC ratio has risen from 0.02 to a peak of above 0.08 in early 2022 - meaning ETH had quadrupled in value relative to BTC at the time. Its value proposition has been on the decline ever since - bitcoin set fresh lifetime highs in April in U.S. dollars (before tumbling 20%), while ether is yet to break its highs from 2021 and is down 52% from its 2021 peak. Year-to-date, bitcoin has returned over 40% to investors while ether holders have gained just under 1%.

Meanwhile, traders such as Kuptsikevich see further pain ahead for those betting on the ETH/BTC ratio. “This ratio has the potential to fall further into the 0.02-0.03 range. This is surprising given the generally positive investor sentiment towards altcoins a few months after the BTC halving and the generally higher beta of altcoins to the stock market, which has been quite strong in recent months,” he noted.

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