Ethereum Rebound Imminent: Is ETH/BTC Ratio Poised for a Turnaround?The crypto bull market last year belonged to Bitcoin, with ETH/BTC suppressed for over two years. Ethereum became a target of criticism during last years bull run, as many Ethereum-killer projects emerged
Ethereum Rebound Imminent: Is ETH/BTC Ratio Poised for a Turnaround?
The crypto bull market last year belonged to Bitcoin, with ETH/BTC suppressed for over two years. Ethereum became a target of criticism during last years bull run, as many Ethereum-killer projects emerged. The chart below shows the ETH/BTC exchange rate, highlighting the plight of ETH holders. ETH didn't surpass its previous bull market peak during last year's bull market. Therefore, the market considers a breakthrough above the previous cycle's peak as a sign of a frenzy bull cycle and the official start of altcoin season.
Last year's bull market was dubbed a Bitcoin bull market because two main factors supported Bitcoin's price since the market entered a bull run: first, Bitcoin ETFs continuously attracted capital into the BTC pool, and second, the Bitcoin ecosystem witnessed a surge in growth, drawing significant funds. Bitcoin became the value consensus of this bull run, while ETH was overlooked.
After seven months of adjustment, ETH's exchange rate is likely to reverse. The reasons for this reversal are as follows:
1. The Bitcoin ecosystem hasn't produced projects as promising as Ethereum's DeFi. BTCFi requires continued development, and most Bitcoin ecosystem projects are from China, with a "pump and dump" approach.
2. Most bull market opportunities lie on-chain. The on-chain explosion will inevitably increase ETH's use cases. As the driving force behind last year's bull market, the Bitcoin ecosystem is unlikely to maintain the same level of prosperity.
3. After the approval of ETH ETFs, ETH has endured months of continuous selling pressure from large institutions like Grayscale. The ETF effect is about to manifest, and the outflow of ETH funds will eventually turn into net inflow. This quantitative change will lead to qualitative change.
4. The ETH/BTC exchange rate has dropped to its historical low since April 2021. Most individuals bullish on BTC and bearish on ETH have already exchanged their ETH for BTC. The remaining holders are generally bullish on ETH.
In summary, the prolonged readjustment, the qualitative change in ETH-ETF's capital inflow trend, and the gradual increase in on-chain applications will significantly expand ETH's use cases, pushing ETH back into a state of market deflation. Although Bitcoin dominates this bull market, the limitations of its ecosystem have created an opportunity for Ethereum's rebound. As market sentiment shifts and capital flows back in, the ETH/BTC exchange rate is poised for a turnaround, potentially ushering in a new bull market.
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