Will ETH Outperform BTC In The Coming Weeks?
Bitcoin hit a price of $42,076 before losing steam over the weekend, plunging 22% over the weekend. Now that the much-needed correction arrived, is it time to take a closer look at Ethereum — which is still trending beneath its all time highs?
Will ETH outperform bitcoin in the coming weeks?
The crypto market dropped over $60 billion as investors cashed out in fear of a deep correction. At the time of publishing, bitcoin lost around 22%, Ethereum 24% and Litecoin 33% on the slump.
Now that the long-awaited correction has arrived, the question is where and when to jump back in — but that’s a topic for the second half of this newsletter.
For now, let’s focus on Ethereum’s potential to begin outperforming bitcoin in the coming weeks. Indeed, as bitcoin trades nearly twice as high as it’s 2017 all time highs, there’s a good case to be made for Ethereum to catch up at the very least.
For sometime now, Ethereum has under-performed or lagged bitcoin in every leg up, but on January 3rd this behaviour changed, and the struggle for market control became more apparent during this corrective move.
As the above chart demonstrates, Ethereum out-performed bitcoin in two crucial moments before finally succumbing to bitcoin-led bearish pressure. Just last night, funding rates for Ethereum perpetuals were 0.5% or higher on Bitmex & Bitfinex, signalling a sustained increase in bullish appetite for Ethereum even in the derivatives space (since the last newsletter).
From a fundamental point of view, Ethereum is also the platform where virtually all DeFi products are built — whether it’s yield, decentralised exchanges, lending, stablecoins or other derivative products.
The total value locked (TVL) in Ethereum-driven DeFi is above $20 billion and it has been growing since early 2020, per data from defipulse.
Before we get into this next bit I’d advise you to get comfortable and strap in, as the opportunity could be overwhelming.
On the weekly chart, the ETH/BTC pair looks like a phenomenal inverse head and shoulder’s reversal. If this scenario were to play out, the 0.05 Satoshi level could be a conservative figure.
In a bull market, everything will go up against USD value even if the DXY has an interim recovery period as incoming US President Joe Biden settles in. The question is which crypto asset will outperform bitcoin, and perhaps eventually the same question could be asked about Altcoin/Ethereum pairs — but let’s not get ahead of ourselves.
Since late December, Ethereum and Bitcoin have struggled for control over the narrative and this is by no means a new phenomenon. A narrative flip occurred in August 2019 when DeFi took off and it will happen again, irrespective of what millionaire bitcoin holders tell you.
The crypto market dynamic has changed. Holding bitcoin long-term carries virtually zero risk in light of all the events that took place in 2020, all of which were covered on my blog.
As such, diversifying into Ethereum and various DeFi projects with a modest percentage of your portfolio could bump up returns dramatically this bull cycle.
To give you some perspective, every single altcoin purchase that we’ve discussed in the telegram channel (apart from Filecoin) has either doubled or tripled already and alt-season has not even started. Once ETH kicks things off, historical precedent tells us to expect some coins to increase hundred-fold.
Of course, trading DeFi altcoins is definitely not for everyone, which is where ethereum comes in. By owning ethereum you’re automatically exposed to DeFi as it is the underlying asset on which everything runs.
Ultimately, derivatives eclipse precious metals in traditional markets in terms of market cap — why would it be any different in crypto? The market speaks financial products into existence, and derivatives are the outcome. Ethereum has systemic risks, but the upside and risk to reward possibilities are too great to ignore.
Bitcoin is undoubtedly the crypto king, but I’ll be damned if I miss an opportunity just because of some misplaced sense of bitcoin puritanism.
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Bitcoin buy zones made simple!
Bitcoin hit the first buy zone above the daily super-trend, bouncing 8.26% (Bitfinex) from the 20-daily EMA at the time of writing.
The pioneer crypto trades above the daily super-trend first established since $11,400 on October 12th 2020. Until price closes below $31,100, then dip-buyers will continue to be rewarded.
However, bearing in mind that every trend eventually comes to an end, breaching this level would signal that a deeper and more drawn out correction is in the works.
As such, it would be prudent to zoom out to the weekly time-frame to investigate longer-term buy zones.
Per the above chart, the 20-weekly EMA and super-trend now stand at $21,200 and $22,700, respectively. The oldest trick in the book is simple ‘moving average’ technical analysis. Eventually price either stalls for moving averages to catch up or plunges significantly to correct an over-extended and frothy market.
At the time of writing, the first scenario seems to be at play, and would be the preferable scenario.
Now that bitcoin is cooling off within bullish territory, this is where many of those who clamoured for discounted bitcoin prices will either fail to buy the dip due to fear, or are already under-water with no capital left to deploy.
This is why it’s so crucial to plan for several scenarios, bearing in mind that there is no such thing as a perfect trade.
There are no solutions, only trade-offs.
Bulls lead the way.
Catch you next time.
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Originally published at https://mailchi.mp.