The 2023-24 crypto cycle has witnessed a departure from historical norms in the eth/btc ratio. The ratio, in question, is a key indicator of capital turnover and risk appetite in the market.
Despite the start of a bull market in late 2022, the ratio has continued to decline unexpectedly. Experts suggest that there are two factors at play regarding this relative underperformance.
Unexpected eth/btc ratio
According to the latest joint report report According to Glassnode and CME Group, the approval of bitcoin spot ETFs in the US in January 2024 is the first factor that significantly boosted buy-side pressure for the leading cryptocurrency.
Secondly, intense competition among Proof-of-Stake (PoS) blockchains has been challenging ethereum’s dominance in areas such as liquidity, capital attraction, user experience, and most importantly, scalability.
“Historically, the most important asset, bitcoin, tends to lead the market during bear markets and early bull markets, but lags during the more speculative phases of late-stage bull markets. The eth/btc ratio is a tool that many analysts look to as an indicator of the degree of capital turnover taking place, which relies on ethereum serving as a benchmark asset for overall risk appetite. However, there has been an interesting shift from cyclical norms during the 2023-24 cycle.”
However, experts at Glassnode and CME Group expect this picture to evolve as the introduction of Ether spot ETFs in the country could potentially catalyze a reversal of this bearish trend.
Investors are eagerly awaiting the release of ethereum ETFs. This week, several prominent asset managers, VanEck, Grayscale, Fidelity, BlackRock, 21Shares, Franklin Templeton, and Bitwise, have filed their revised S-1 registration statements for spot eth ETFs with the U.S. Securities and Exchange Commission (SEC).
The regulator has set a deadline of July 8 for issuers to submit their amended drafts. Industry experts are optimistic that the securities regulator could approve the drafts within the next two weeks, given that issuers have already completed a significant part of the necessary preparations.
It’s worth noting that while the SEC approved issuers’ eth ETF 19b-4 spot applications on May 23, they must also greenlight their S-1s before trading can begin.
ethereum On-Chain Metrics
Amid improved sentiment, ethereum has managed to maintain its position above the $3,000 level.
Furthermore, the latest data suggests that the altcoin is currently close to a potential bottom, as evidenced by ethereum’s realized market cap, which currently stands at $240 billion. With the market cap close to or below the realized market cap, many holders are in a losing position. Historically, this indicates an advanced bear market, implying that ethereum’s price could be primed for a bullish reversal.
Meanwhile, ethereum’s current market cap to realized value (MVRV) ratio is showing signs of improving profitability and is in the recovery and bull market phase. The MVRV ratio has been steadily increasing since mid-2023, which was described as the last stage of a bear market, and is now above 1.0, indicating that the average ethereum investor has unrealized profits.
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