Ether (ETH), the digital currency fueling the Ethereum network, has endured a rather grim month thus far. Despite its widespread usage across various areas of Web3, such as DeFi, NFTs, GameFi, GambleFi, and SocialFi, Ether’s performance has been far from impressive.
The ETH price has gone down by about 7.5% this month and has moved just below $1,550. Last week, it hit a seven-month low at $1,520 per coin.
Based on this, another cryptocurrency has seen a decline for the third time in four months after dropping nearly 28 percent off this year’s high of about $2,150 in April.
However, for the month, Bitcoin (BTC), which is the biggest cryptocurrency, had only a downward price change of 0.5%.
The current price per BTC stands at over $26,800, showing a 16% dip from the all-time high price of approximately $32,000 set back in the month of June this year.
As Ethereum continues to slump for the last year, investors are raising questions and the ETH/BTC pair sunk to a low of 0.058 in some instances this week. This prompts speculation about whether it is opportune to sell off Ethereum and invest in Bitcoin.
There is a trio of justifications as to why that could potentially be an advantageous notion.
Bearish Narration Evident in Technical Analysis
For almost a year, ETH/BTC has remained trapped in a bearish descending wedge formation.
However, all of this unexpectedly changed around seven days prior, when the cross boldly fractured and descended below the confines of the pattern.
The downtrend that once provided support now stands as a solid barrier for ETH/BTC, hindering its progress.
Indications of continuing bearish momentum are evident due to the cross facing significant opposition from its major moving averages in recent months. Coupled with this, the cross has encountered strong resistance, solidifying the domination of the bears.
The emergence of new technological advancements indicates a persistent bearish sentiment prevailing in the market. It is highly likely that in the upcoming months, there will be a revaluation of market conditions, leading to a possible revisit of the mid-2022 low levels of approximately 0.049.
Ether Faces Demand Headwinds and Inflation
Crypto Major cryptocurrency exchanges are experiencing a decline in spot trading volumes, reflecting a general lack of interest in cryptocurrencies. However, the issue of weak demand appears to significantly affect Ether in particular.
Last week in the US, a series of Ethereum futures exchange-traded funds (ETFs) were introduced. However, despite much anticipation, these funds saw disappointingly low levels of trading activity. This indicates that institutions are currently opting to stay out of the market.
It comes as no shock that the trading volumes for Ether futures have experienced a significant decline since March.
September saw a notable decline in Ether future trading volumes, according to The Block’s data, with figures plummeting to a mere $250 billion compared to the robust $770 billion reported in March.
There is more than just data in the realm of trading that indicates a decline in demand.
For a while now, on-chain metrics like active user count, transfer count, overall transfer amount, and creation of new addresses have remained stagnant.
With recent developments such as the decrease in gas fees and the transformation of the electricity supply into an inflationary state, we have reached a turning point.
According to Glassnode, the total amount of Ether has recently surpassed 119.98 million, marking an increase from its previous value of less than 119.9 million back in late August.
This year, the token found a ray of hope in the form of a strong desire for Ether staking.
ETH staking generates a stable return that falls consistently below 4%, whereas long-term US government bonds tend to offer a more favorable yield at around 5%.
Investors often opt for the safe haven bond market to protect their funds, viewing these bonds as a secure asset. This strategic choice mitigates the potential risks associated with investing in Ether, where the return could be comparatively lower.
Bitcoin Looks Like the Better Near-term Bet
In addition to encountering technological and market challenges, Ether also confronts heightened regulatory perils in the United States when compared to Bitcoin.
The present SEC administration has openly declared Bitcoin the sole cryptocurrency exempt from being labeled as a security.
2023 has witnessed a wave of relentless legal action from the SEC as it takes on prominent American companies and designates cryptocurrencies as securities.
Despite the absence of a clear declaration from the agency regarding their stance on Ether’s classification as a security, SEC Chairman Gary Gensler has previously expressed his belief that ETH should be considered as such.
Investors will continue to experience anxiety regarding the future regulations surrounding ETH in the United States until there is a clearer direction. This assurance is most likely to arise from either the adoption of comprehensive crypto legislation by Congress or a string of unfavorable outcomes for the SEC in their ongoing legal battles with American cryptocurrency companies. However, it is improbable that these definitive resolutions will occur in the near future.
In the realm of digital currencies, Bitcoin remains an unshakeable sanctuary.
Given the anticipated surge in optimistic discussions regarding Bitcoin, projecting its growth until 2024, coupled with the SEC’s anticipated approval of multiple spots Bitcoin ETFs and the imminent halving in April, it seems opportune to consider shifting focus toward the leading cryptocurrency worldwide.
Why has ETH been lagging BTC for some time now?
Within a period of one month, Ethereum has suffered a decrease of about 7.5% for instance. Moreover, it has also gone down by about 28 percent from its peak levels that were experienced during the year.
Conversely, Bitcoin encountered a negligible loss of merely 0.5% for the same period and is currently down by around 16% from its yearly peaks.
How do the technical signals for Ethereum (ETH) compare to those for Bitcoin (BTC)?
Ethereum’s current market signals point towards a pessimistic trajectory. The ETH/BTC pair recently surpassed a descending wedge formation that endured for nearly 12 months. Furthermore, this intersection encountered formidable opposition at its significant moving averages, denoting a downward momentum and the likelihood of exploring lows reminiscent of the middle of 2022.
What impact does demand have on the state of Ethereum (ETH), and what factors contribute to its waning allure?
Ethereum is encountering obstacles in meeting its demand, predominantly evidenced by the dwindling trading volumes of Ether futures. Despite the implementation of exchange-traded funds (ETFs) for Ether futures, trading volumes persistently display feebleness, indicating institutional apprehension. Concurrently, on-chain measurements like active users, transfers, and addresses have come to a standstill, while the presence of low gas fees and an inflationary Ether supply further impede demand.
How does Ether staking compare to other investment options, and why might it not be attractive to investors?
The yield from staking Ether remains consistently below 4%, whereas long-term US government bonds present an approximate yield of 5%. As government bonds are unanimously recognized as being risk-free, investors might be inclined toward the more secure bond market to attain a slightly superior yield.
In the United States, how does Ethereum (ETH) differ from Bitcoin (BTC) in terms of potential regulatory challenges?
SEC Chairman Gary Gensler’s notion of Ethereum potentially being classified as a security adds a layer of ambiguity to its regulatory status in the United States. It’s interesting to note that Bitcoin, on the other hand, stands alone as the sole cryptocurrency that is definitively exempt from such classification by the current SEC leadership.
Is Bitcoin (BTC) a more secure investment choice than Ethereum (ETH) amidst the present circumstances?
In the coming months, Bitcoin seems to offer a more secure option owing to its resilient technical aspects, the possibility of the SEC endorsing spot Bitcoin ETFs, and the forthcoming halving event in April, which is expected to prompt optimistic sentiments. Conversely, Ethereum encounters uncertainties in terms of regulations and experiences a decrease in demand.
Why, as a matter of fact, in an investment portfolio would some investors prefer ETH over BTC?
Investors have to look at some aspects such as technical indicators, demand patterns, uncertainty of regulation, and possible stories that could be developed for the market. Before making a decision, it is crucial to thoroughly evaluate the existing market circumstances and align them with personal investment objectives.