DMR News

Advancing Digital Conversations

Ethereum’s Recent Performance Against Bitcoin: Analysis and Implications

ByDayne Lee

Feb 28, 2024

Ethereum’s Recent Performance Against Bitcoin: Analysis and Implications

Ethereum’s native cryptocurrency, Ether (ETH), has exhibited significant momentum against Bitcoin (BTC) in recent weeks, marking a notable gain of over 20% since Feb. 12. This surge has been largely fueled by market expectations surrounding the potential approval of a spot Ether exchange-traded fund (ETF) in the United States by May of this year.

Anticipated Spot Ether ETF Approval

The surge in Ether’s value relative to Bitcoin has been driven by growing anticipation surrounding the potential approval of a spot Ether ETF in the United States. Investors have been closely monitoring regulatory developments, with hopes that a spot ETF could provide increased accessibility and legitimacy to Ethereum as an investment asset.

Historical Inflection Point: Bearish Setups

Despite the bullish sentiment surrounding Ethereum, the widely-tracked ETH/BTC pair has reached a historical inflection point, signaling potential risks of correction in the near term.

Bearish Fractal Returns

A closer look at the four-hour ETH/BTC chart reveals Ether hovering around its 1.00 Fibonacci retracement level at 0.06044 BTC. Moreover, the relative strength index (RSI) reading has entered the “overbought” territory, surpassing the 70 threshold. This combination of technical indicators mirrors a fractal pattern observed in January 2024, preceding an 11.65% decline in ETH/BTC rates.

  • Overbought RSI and Historical Resistance: The convergence of an overbought RSI and a historical resistance level suggests potential exhaustion among investors, potentially leading to a downturn in Ethereum’s value relative to Bitcoin.

Rising Wedge Pattern Emergence

Adding to the bearish outlook is the emergence of a rising wedge pattern on the chart, pending bearish confirmation. This pattern typically indicates a reversal in momentum from bullish to bearish, potentially resulting in a further decline of approximately 10.85% to around 0.053 BTC by March.

  • Bearish Reversal Indicators: Rising wedge formations are often viewed as bearish reversal indicators, signaling a shift in market sentiment from optimism to caution or pessimism.

Descending Triangle on the Weekly Chart

Zooming out to the weekly timeframe, Ethereum exhibits signs of a bearish reversal as it struggles to breach its multiyear descending trendline resistance. This trendline coincides with the ETH/BTC’s 50-week exponential moving average (50-week EMA), suggesting formidable resistance levels ahead.

  • Resistance Confluence: The convergence of the descending trendline resistance and the 50-week EMA could impede Ether’s upside potential in the coming weeks, potentially prompting a pullback towards the 0.051 BTC level.

Significant Divergence in Whale Holdings

A noteworthy trend observed among major investors, or “whales,” is the contrasting behavior in their Ethereum and Bitcoin portfolios. Data from Glassnode indicates a significant decline in the number of entities holding 1,000–100,000 ETH in February, while the number of Bitcoin entities possessing over 1,000 BTC has increased.

  • Institutional Preference: This divergence suggests a growing preference for Bitcoin over Ethereum among institutional investors, reinforcing the bearish outlook for the ETH/BTC pair alongside technical indicators.
Overbought RSIRSI reading above 70, indicating potential exhaustion among investors.
Historical Resistance LevelSignificant resistance level based on previous price action.
Rising Wedge PatternBearish reversal pattern signaling potential downward momentum.
Descending Trendline ResistanceLong-term resistance trendline indicating potential reversal.
Whale HoldingsDivergence in holdings of Ethereum and Bitcoin among major investors.

While Ethereum’s recent performance against Bitcoin has been impressive, various technical indicators and market dynamics point to potential downside risks in the near term.

Featured image credit: Nathan Stirk via Getty Images

Dayne Lee

With a foundation in financial day trading, I transitioned to my current role as an editor, where I prioritize accuracy and reader engagement in our content. I excel in collaborating with writers to ensure top-quality news coverage. This shift from finance to journalism has been both challenging and rewarding, driving my commitment to editorial excellence.