ethereum has been in a descending channel against bitcoin since August last year, meaning that bitcoin has been the best investment during this time. However, historical trends show that the tides could soon turn, and ethereum is possibly about to enter an accumulation phase.
ethereum Price Action
ethereum is trading at $1,600, marking a 22% decline from its price last August. bitcoin, on the other hand, is up 8% over the same period.
This is a common trend that occurs during bear markets. Coins with major market capitalizations They tend to be more resistant to price declines as investors become more risk-averse and seek to preserve their capital. While ethereum is not short of a market capitalization of $187 billion, it is still considerably lower than bitcoin at $525 billion.
During bull markets, coins with lower market capitalization once again outperform bitcoin as investors gravitate toward assets with higher potential returns.
ethereum price compared to bitcoin
When comparing the value of eth with btc, it is evident that ethereum has been trading within a descending channel since last August. This pattern, characterized by its lower highs and lower lows, often indicates a bearish trend in the market.
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eth's valuation against btc over time. Source: ETHBTC on TradingView
The table above highlights three other distinct phases:
Accumulation phase: During this phase, the price tends to stabilize, hinting at an upcoming change in momentum.
Ascending channel: Here, the price experiences a significant reversal, often in a parabolic path, characterized by higher highs and higher lows.
Distribution phase: In the final phase, the price ceases its upward movement. Investors often use this phase to capitalize their profits and liquidate their positions.
The accumulation phase is usually the best time for investors to convert their bitcoin into ethereum. This phase is marked by the price holding at the bottom and then showing signs of reversal. ethereum is still forming lower lows against bitcoin, so it has not yet entered the accumulation phase. However, the latest cycle shows that this could be changing soon.
Last cycle
Reflecting on the last cycle, ethereum was in a descending channel against bitcoin for 17 months. The accumulation phase occurred from September 2019 to February 2020. According to the four-year theory, which suggests that similar phases occur in the market every four years, this shows that the accumulation phase should also approach very soon in this cycle.
However, while the last cycle offers valuable information, it is important to note that no two cycles are the same. In the current cycle, eth price action has not seen as large a drop as in the previous cycle, which could be attributed to changes in fundamentals and maturation of the assets.
Final thoughts
While an accumulation phase for ethereum is yet to be confirmed, the possibility remains that its price could fall further relative to bitcoin. However, if the previous cycle is anything to go by, we could soon enter the accumulation phase. This phase usually presents excellent buying opportunities for ethereum.
Investment Disclaimer: The content provided in this article is for informational and educational purposes only. It should not be considered investment advice. Consult a financial advisor before making any investment decisions. Trading and investing involve substantial financial risk. Past performance is not indicative of future results. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities or cryptocurrencies.
Featured image from ShutterStock, charts from TradingView.com
