How low can Ethereum prices fall compared to Bitcoin within the DeFi contagion?

How low can Ethereum prices fall compared to Bitcoin within the DeFi contagion? – Mail Bonus


Native Ethereum Ether (ETH) tokens have fallen by more than 35% against Bitcoin (BTC) since December 2021 with the potential to decline further in the coming months.

ETH / BTC weekly price list. Source: TradingView

ETH / BTC mechanism

The steady development of the ETH / BTC pair usually indicates an increased risk appetite among cryptocurrencies, as speculation is more focused on Ether’s future assessment in exchange for keeping its long-term capital in BTC.

On the other hand, the bearish ETH / BTC cycle is usually accompanied by a fall in altcoins and a decline in Ethereum’s market share. As a result, traders are looking for security in BTC, which shows its risk-taking stance in the cryptocurrency industry.

Ethereum TVL wipes out

Interest in the Ethereum blockchain increased significantly during the pandemic as developers began to turn to creating a wave of so-called decentralized financial projects, including peer-to-peer and lending platforms.

This led to an upswing in the total value of locks (TVL) within the Ethereum blockchain ecosystem, which rose from $ 465 million in March 2020 to up to $ 159 billion in November 2021, up more than 34,000%, according to DeFi Llama.

Ethereum TVL success since 2019. Source: DeFi Llama

Interestingly, ETH / BTC increased by 345% to 0.08, a peak in 2021, over the same period, given the increased demand for trading on the Ethereum blockchain. However, the pair has since fallen above 35% and was trading at 0.057 BTC on June 26th.

The decline in ETH / BTC coincides with a massive drop in Ethereum TVL, from $ 159 billion in November 2021 to $ 48.81 billion in June 2022, driven by contagious fears in the DeFi industry.

Institutions have also withdrawn $ 458 million this year from Ethereum-based investment funds as of June 17, indicating that interest in Ethereum’s DeFi boom has waned.

Bitcoin in difficulty but stronger than Ether

Bitcoin has faced fewer disadvantages compared to Ether in the ongoing bear market.

BTC prices have fallen by almost 70% to about $ 21,500 since November 2021, compared to a 75% drop in Ether over the same period.

Also, unlike Ethereum, Bitcoin-targeted investment funds have seen inflows of $ 480 million to date, showing that the decline in BTC has done little to curb demand among institutional investors.

Investment flows in / out of cryptocurrencies by assets. Source: CoinShares

Objectives ETH / BTC down

Capital flows, coupled with growing mistrust in the DeFi sector, could continue to benefit Bitcoin over Ethereum in 2022, leading to greater disadvantages for ETH / BTC.

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From a technical point of view, the pair has held above a support rally defined by a rising trend line, a Fibonacci retracement level at 0.048 BTC, and its 200-week exponential moving average (200-week EMA; blue wave in the chart below) close to 0.049 BTC.

ETH / BTC weekly price list. Source: TradingView

In rebound, ETH / BTC could test the 0.5 Fib line next to close to 0.062. On the other hand, a decisive break below the support agreement could mean a decrease towards the 0.786 Fib line at 0.027 in 2022, down more than 50% from today’s price.

The ETH / BTC breakdown could coincide with a prolonged decline in the ETH / USD market, primarily due to the Central Bank’s quantitative easing, which has recently pushed lower cryptocurrency prices against the US dollar.

On the other hand, weaker economic information could cause the central bank to cool down. This could limit the disadvantages of Ether and other cryptocurrencies in the dollar market, according to Informa Global Markets.

The company pointed out:

“Macroeconomic conditions need to improve and the central bank’s aggressive approach to monetary policy must subside before cryptocurrency markets bottom out.”

But given that Ethereum has never regained its historic high against Bitcoin since June 2017 despite a strong uptake rate, the ETH / BTC pair could be under pressure with the 0.027 target in sight.

The views and opinions expressed herein are those of the authors only and do not necessarily reflect the views of Every investment and trading business involves risk, you should do your own research when making a decision.