The price of ETH, has reached its lowest point against bitcoin (BTC) in 1 and a half years, marking levels not seen since June 2022. The ETH/BTC pair, that is, the ratio between the price of ether and the price of bitcoin, indicates how many units of bitcoin are needed to purchase one unit of ether.
Throughout 2023, ETH has maintained a persistent bearish trend against bitcoin, recording a 29% decline in its value since January 1.
Why is Ethereum cryptocurrency falling against bitcoin?
First of all, it is necessary to mention that it is common for altcoins to depreciate against bitcoin. But, in the case of ETH, it draws attention because it is the second digital currency with the highest market capitalization and has a very large community of users, developers and disseminators.
A possible explanation for ETH's decline is that it has run out of powerful narratives to drive it higher, after the Merge. This was one of the updates to its network that occurred in September of last year. The expectation caused by the Merge (event in which mining was abandoned and the proof-of-stake protocol was adopted) was not later surpassed by other events related to Ethereum.
The research company, K33 Research, supports this theory. Last October he recommended that investors not have high exposure to ETH due to a “lack of compelling medium-term [bullish] narratives.”
Also, the bear market that dominated 2022 may have led many to abandon altcoins and, in 2023, decide to keep their capital protected. This is what the analysis firm, Kaiko, believes. According to a report published by this company, many traders "migrated" from Ethereum and other networks to bitcoin, which is the digital currency considered the most secure.
Something that could have boosted the price of ETH this year was the approval of exchange-traded funds ( ETFs ) based on ETH futures. However, after their launch they attracted less capital than expected. In comparison, the trading volume of those financial instruments represented only 0.2% of what the first bitcoin (BTC) futures ETF had in 2021.
Another possibility is that, unlike in previous cycles, the Bitcoin network now leads the non-fungible token (NFT) space with Ordinals, as was recently evident. While previously dominant narratives (e.g. NFT, DeFi, Metaverses, etc.) were built on Ethereum, Bitcoin is the undisputed king of this bull cycle.
This unfavorable dynamic for the cryptocurrency raises questions about the future performance of ether and generates concern in the market. Many think this could be a rebound point.
The Stony Chambers Asset Research company made a projection on the performance that ETH could have in the next semester and assures that it will surpass BTC in percentage performance, due to changes in market conditions.
Among the arguments for making this estimate is that digital assets related to artificial intelligence (AI) will become trendy next year and it is possible that the Ethereum network will host many of these tokens, which would have a positive impact on the price of ETH. . For its part, Matrixport, an investment and financial services company, assured that ether is “ undervalued ” compared to bitcoin, so the market is not fully reflecting its real or potential value.
