Ethereum is firm when writing but continues to underperform versus Bitcoin. Though ETH is floating above $2,400, and may even break above $3,000 in the coming years, the rapid strengthening of the world’s most valuable coin, on the other hand, might push the ETH/BTC ratio to multi-month lows.
ETH Struggling Versus Bitcoin, ETH/BTC Ratio Drops To A 40-Month Low
As of September 20, IntoTheBlock data reveals that ETH is trading at the lowest level versus Bitcoin in over 40 months. This trend clearly shows that the market, even with the engagement of institutions, is bullish on BTC.
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Interestingly, ETH continues to underperform despite the approval of spot Ethereum ETFs for trading in July 2024. The approval of these complex derivatives allowed institutions to get exposure to the second most valuable coin within the law’s confines while not breaking the bank as they did.
Previously, institutions in the United States seeking to buy ETH could only do so by purchasing Grayscale ETHE shares. The problem is that fees were higher when the financial world didn’t know the regulatory status of ETH. Although nothing has changed, the approval of spot Ethereum ETFs, preventing issuers from staking coins bought by clients, was seen as a win.
The United States Securities and Exchange Commission (SEC) has yet to issue an official statement endorsing ETH as a commodity similar to Bitcoin. However, the Commodity Futures Trading Commission (SEC) has repeatedly stated that ETH is a commodity.
With ETH sliding versus BTC, IntoTheBlock analysts are convinced that institutional investors are confident of Bitcoin’s prospects. Specifically, they pointed to Bitcoin’s relative stability compared to Ethereum, an asset with a higher risk-reward profile.
Will Ethereum Find Support?
Even with this assessment, it should be noted that Bitcoin remains a transactional layer, riding on its first-mover advantage. On the other hand, Ethereum is the first smart contracts platform, and hosts various innovations ranging from DeFi, NFTs, and is now driving tokenization.
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Earlier on, Larry Fink, the CEO of BlackRock, said real-world asset (RWA) tokenization, most of which is done on Ethereum, will rise to command a trillion in market cap. BlackRock has issued BUIDL, a product tokenizing United States Treasuries, on Ethereum.
It remains to be seen whether ETH will recover versus BTC. Looking at the daily chart, the trend appears to be shifting, at least in the immediate term. The double-bar bullish formation of September 18 and 19 has been confirmed today.
At the same time, ETH seems to be strengthening, turning the corner from the 61.8% Fibonacci retracement level of the 2020 to 2021 trade range.
Feature image from Canva, chart from TradingView