ETH/BTC Drops to Its Lowest Level Since April 2021, What Does It Mean?

Bittime - ETH/BTC fell to its lowest level since April 2021. What does this mean for the crypto market today? Check out the complete explanation in this article to find out!

Please note, the ETH/BTC ratio or ETH to BTC is a popular crypto asset trading pair that shows the price of Ethereum in Bitcoin. Follow the full review here.

ETH/BTC Ratio Hits Lowest Point

The ETH/BTC ratio, which measures the relative strength of the price of Ether (ETH) against Bitcoin (BTC), recently hit its lowest point since April 2021. On Monday morning European time, this ratio fell below 0.04, 0.039 to be exact. This means the value of ETH relative to BTC has plummeted nearly 30% since the start of the year.

To understand how dramatic this change was, let's look back. In the past five years, the ETH to BTC ratio has risen from 0.02 to a peak above 0.08 in early 2022. This means that, in that time, the value of ETH has increased four times as much as BTC. However, since then, ETH's value proposition has continued to decline.

Read also: Bitcoin (BTC) Price Prediction According to Famous Investors, Rising After The Fed's Move?

Bitcoin vs Ethereum: The Battle of Two Giants

While Bitcoin hit a new record high in US dollar terms in April (despite later dropping 20%), Ethereum has yet to break through its record high from 2021 and is currently down 52% from its peak. 

Since the start of the year, Bitcoin has provided investors with returns of more than 40%, while Ethereum holders have earned less than 1%.

Alex Kuptsikevich, senior analyst at FxPro, explained, “The long-term reason for the rise (of the ETH/BTC ratio) is the activity of Ethereum developers, both regarding the blockchain itself and the ecosystem developing around it. 

However, towards the end of 2023, the trend shifts towards Bitcoin as the prospect of exchange-traded ETFs becomes more prominent.”

ETF Becomes Factor in Decreasing ETH to BTC Ratio

The launch of a spot-based ETF (Exchange-Traded Fund) for Bitcoin has changed the crypto investment landscape. Since its launch, the Bitcoin ETF has attracted more than $17 billion (around IDR 260.1 trillion) in net inflows in less than eight months of trading. 

In contrast, the Ethereum ETF actually recorded a net outflow of $580 million (around IDR 8.87 trillion) since its launch at the end of July.

Read also: What is Ethereum 2.0? This is the Latest Update!

Other Factors Affecting ETH to BTC

Nick Ruck, crypto market researcher, added an interesting perspective, “ETH/BTC is hitting new lows as yields from staking ETH continue to be uncompetitive, at around or less than 3% APR, while staking stablecoins or trading other ecosystem tokens like TON provide higher returns tall."

Additionally, Bitcoin has also held up well in its range. On September 13, Bitcoin spot ETFs recorded their best day in the past two weeks, adding to their appeal compared to ETH.

What Can We Expect Next?

Analysts expect the ETH/BTC ratio to fall further, potentially to the 0.02-0.03 range. Kuptsikevich opined, "This is surprising considering the generally positive investor sentiment towards altcoins in the months following the BTC halving and the generally higher beta of altcoins relative to the stock market, which has been quite strong in recent months."

He concluded, "Investors are likely awaiting further clarity on future monetary and regulatory regimes. Only a sustained rally will encourage investors to seek higher returns and take more risk by buying altcoins."

Conclusion

This decline in the ETH/BTC ratio is not just a number on the screen. This reflects shifts in investor sentiment and broader market dynamics. For retail investors, this could be a signal to re-evaluate their investment strategy. 

For developers and users of the Ethereum ecosystem, this may be a call for faster innovation and improvement.

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