The Odd Couple: Understanding the Relationship of Bitcoin and Ethereum
The relationship between bitcoin and Ethereum has always been a funny one- but understanding the inner workings of this notorious relationship could help set investors up for the next surge.
Since nearly the advent of Ethereum (ETH) itself, the token has kept a pretty interesting pace with bitcoin. ETH alongside most other major altcoins has normally run in front of the historic crypto’s rallies, often functioning as an oscillator of good things to come in the bitcoin arena.
What was deemed “altcoin season” a period after a large bitcoin rally and subsequent correction, Ethereum would make its move on the market, signally whether we should expect a bull run in bitcoin, or if another few weeks of the frosty forecast was in order; sort of like a bitcoin Punxsutawney Phil.
Lately, however, this long term correlation has been nowhere to be seen as ETH markets seem to stagnate and Bitcoin enjoys several strong rallies.
Leaving ETH underperforming despite renewed interest and vigor in crypto markets at large- owing largely to DeFi (decentralized finance) and a bigger push from legacy fintech. Understanding the correlation between the two can be tricky for first-time investors, but platforms like Bitvavo are here to help.
Patiently explaining charts and oscillators while helping to better investment savvy, which isn’t just good for investors- but for the markets as a whole.
A Long Correlation Now a Struggle to Keep Up
Largely, in recent years what is believed to have held such a strong correlation between the two markets is the relationship between Ethereum and bitcoin themselves.
Although these two coins have often been pitted against one another in an ideological way, Ethereum and bitcoin actually have a pretty solid working relationship. One that has become much more symbiotic in recent years.
For a long time running, bitcoin seemed to become the asset investment, where Ethereum held up the business side of things.
Largely using a strong foundation of decentralized and open-source coding, the Ethereum network was capable of creating the infrastructure that bitcoin required to become a viable working financial structure.
Where bitcoin could, and has, provided the strength and stability to hold its value well, function as a borderless currency, and have real “go” power when being considered an alternative to existing fiat structures.
Ethereum on the other hand, with a keen focus on DApps (Decentralized application) and a paradise for any developers looking to get their feet wet- or go headfirst- into a world of coding fintech structures in an open-source format.
Ethereum caught the starry eyes of coders, while bitcoin steadily took the interest of investors.
While it’s still safe to say that interest in Ethereum is holding strong, and will probably see itself a rally soon, particularly as bitcoin is looking for another prolonged correction in the near future, the market currently hasn’t seen much favorable movement.
Over the summer, ETH seemed to be keeping pace with BTC’s steady rise, however that honeymoon period was definitely over, come the start of Q4 of this year.
Why Faltering ETH Could Spell Sucess for Both Cryptos
One of the reasons that many experts believe Ethereum is seeing this somewhat unprecedented slump may not actually be so disastrous.
Bitcoin has been unexpectedly strong throughout the summer. Holding fast and showcasing stability that is unusual for the coin to say the least.
Whether that has to do with rising concerns surrounding the reliability of fiat, growing distrust of large governmental powers, an economy in crisis, or any of the other issues brought to you by the year 2020, bitcoin has outperformed almost everyone’s expectations this year.
Ethereum seems to be showcasing business as usual in contrast.
Currently, Ethereum miners seem to be in the middle of a decent-sized sell-off. Amid a more stabilized bitcoin market, less FOMO has been warranted in altcoins as the focus has shifted starkly to the legacy coin.
Resulting in many ETH miners and long-term investors dumping their stores, according to on-chain data. So with a decrease in pressure to buy, and long-held tokens moving around, ETH has seen a bit of a slump in price, despite the flurry of activity.
Which is why the price pinch may not be as painful as it seems. As the price may have dropped, it’s nowhere near the bear cave just yet.
What this may signal, is instead an overall positive sentiment for the market, adding credence to the idea that ETH price isn’t overextended- making room for an uptrend on the horizon.
Many experts also expect ETH to drop off sharply against bitcoin before there is room for a decent buyback. Again providing much-needed space for an ETH retest. And as ETH performs well, other altcoins are sure to follow.