Will Ether Leave Bitcoin In The Dust?
While Analysts Debate Ether’s Prominence, The Clue Could Be In The ETHBTC Cross
Year-on-year, ETHUSD is still up more than 1,000% even after the recent corrections, whereas at $65,000, BTCUSD was up only more than 500% before its own pullback to current levels.
There has been no change in the outlook for BTCUSD. Bitcoin will range between $27,900 and $42,000 until this channel breaks, whenever that is. Or rather, until China speaks or Elon Musk tweets again.
In the meantime, here’s a technical snapshot of ETHUSD.
Where ETHUSD has been: Ether had been rising steadily after breaking above $1,000 in January. ETHUSD hit a ceiling at $2,030, fell back to $1,500, and then tested $2,500.
Toward the end of April, ETHUSD joined the craze for crypto assets in earnest after breaking through resistance at $2,500. By this time, bitcoin had only just rebounded from its latest major correction. Ether made it past $4,000, and then tried and failed to reach $4,500.
Where ETHUSD is now: Ether faced its own major correction as drastically as it had surged in the first place. ETHUSD hit a floor of bids around support at $2,030 (which was a resistance level prior), before ranging around $2,500.
Similar to bitcoin, ETHUSD is now supported by firm bids around $2,030 and capped by light offers above $2,970.
Where ETHUSD might go: In contrast to bitcoin’s situation, the aforementioned ether bids do not appear to have enough collective strength to propel the digital asset above those sparse offers, which probably means ETHUSD will range widely around the pivot at $2,500 for the foreseeable future.
Much has been written in recent weeks about whether ether will “overtake” bitcoin. However, not everyone agrees on what this would actually look like.
While some are closely watching the market capitalization of this altcoin to see whether it will surpass that of bitcoin, others are more concerned with the possibility that ether will become more prominent than the world’s largest cryptocurrency by market capitalization.
Only time will tell.
In the meantime, old school traders like me tend to look at the simplest way to answer the above question: the good old price chart.
In most trading pairs, at least one commodity will be more liquid than the other. The pair we will be looking at involves commodities that are both illiquid cryptos.
Without further ado, let’s have a look at the ETHBTC daily chart.
To be clear, the convention is that ETHBTC is the bitcoin price of one ether. If ETHBTC goes up, it means ether has gone up in value versus bitcoin, and vice versa.
Where ETHBTC has been: Ether has been ranging around a pivot at 0.03 bitcoin since July 2020. In January 2021, ether began to show a little more spirit to break above 0.04 bitcoin, before correcting back toward support at 0.03 bitcoin by the end of February.
Notice here again the traders’ penchant to target “round number” levels.
Since then, ether was on a roll, breaking through 0.04 again, then passing 0.05 and 0.06 bitcoin with virtually little resistance before gapping up in May to cross over 0.07 bitcoin.
Where ETHBTC is now: Ether failed to open above 0.08 bitcoin. ETHBTC fell back below 0.07 bitcoin and is now just negotiating around that pivot level.
Where ETHBTC might go: The slope of the 50-day moving average (the red line) is still up. I am not a big fan of looking for moving average crossovers, but the 50-day MA does not look like it will cross below the 200-day MA (the blue line) anytime soon.
So the simplest analysis is that ETHBTC is still in an uptrend.
Traders with a neutral bias may traverse the boundaries of the ETHBTC range between 0.0650 and 0.0750 bitcoin (the yellow box of Chart 2).
Ether and bitcoin are already illiquid against the U.S. dollar (the reader may dispute this in the comments if the need requires), and will be even more so against each other.
For example, an investor could easily trade a liquid forex pair like GBPUSD (pound sterling against the U.S. dollar) on any trading platform and be confident the prices there are as close as possible to market “equilibrium” without any potential for arbitrage. With trading instruments like BTCUSD, such confidence is usually lacking.
Due to the illiquid nature of crypto trading pairs, ether bulls would do well to only buy ETHBTC closer to the 0.06 bitcoin level (i.e. instead of 0.065 bitcoin), while bitcoin bulls might want to only sell ETHBTC nearer to 0.08 bitcoin (i.e. instead of 0.075 bitcoin). This should take care of the slippage problem that always comes up when trading illiquid trading instruments.
Note that currently, order book information on ETHBTC trading is very thin. The only thing that is certain at the moment is that the 0.06 bitcoin level is very well-supported by long term ether bulls for now.
As the reader may now see, analyzing market capitalization is not the only way to project the future prominence of ether over bitcoin going forward.
All displayed chart support/resistance lines are either historical levels or actual confirmed order book levels currently being traded by major players based on available market intelligence.
Disclaimer: This content is for educational purposes only. It does not constitute trading or investment advice. Past performance does not indicate future results. Do not invest more than you can afford to lose.
If you found this content interesting, and have an interest in commissioning content of your own, check out Quantum Economics’ Analysis on Demand Service.
