ETH/BTC seems to be heading for a drop in value in the upcoming quarter.

Cryotocurrency
Bitcoin and Crypto Market News Wednesday, May 18, 2022 - 19:27

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While there’s a positive long-term fundamental outlook for Ethereum, the second-largest crypto hasn’t been left untouched from the bear market impact. Ethereum has lost 30% of its value since the start of May. The currency is nearly its psychological support at $2,000. At the time of writing, ETH was trading at $2,032, down by 16% in the last seven days and 58% from its November all-time-high.

Ethereum accumulators need to understand and accept the inherent risks in the market that is still tied to performance of Bitcoin in the short-term. We try to analyze if ETH can outperform BTC through the year.

ETH/BTC pair in a Wyckoff distribution phase

Ethereum’s valuation with respect to Bitcoin has followed a general pattern for some years now. It usually ascends in Q1 and Q2 and bleeds (drops) for the remaining part of the year. The trend has been conspicuous from 2015 to 2020. Also, Ethereum has outperformed Bitcoin when Bitcoin is trading above its 20-week moving average (MA).

Today, Bitcoin is trading below its 20-week MA and analysts are calling for ETH/BTC to play out a Wyckoff distribution phase.


Wyckoff Distribution pattern

Ethereum’s valuation against Bitcoin (ETH/BTC) is potentially going through a Wyckoff distribution (and currently in Phase D) where Ethereum will likely come down to its general uptrend channel (channel is the space between the two lines on the graph below) before it can trend higher.


ETH/BTC chart

Source: TradingView, Poloniex

Considering the above, the valuation of ETH with respect to BTC will likely go down to around 0.04 in the next quarter. There are some chances of the pair sliding further down to its lowest level (0.02) witnessed during the September 2019 bear market.

Ideally, the line should bounce at the bottom of the channel, regain bullishness leading into 2023 and hit the 0.08-0.1 range in Q1 2023.

What can investors do now to prepare for this eventuality?

The best way to navigate the market is to be ready for all types of eventualities. Given the above possibility, it is prudent to invest all new monies in Bitcoin in the upcoming months. Some may also convert their ETH to BTC during the drop and reconvert BTC to ETH once it hits the bottom of the channel. This way, there is a potential benefit of gaining more ETH by keeping the BTC base and playing the market though there are risks involved.

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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.

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