Ethereum’s native token, ether (eth), has declined more than 35% against bitcoin (btc) since December 2021, and may decline further in the coming months.
bullish trends in the eth/btc pair generally suggest increased risk appetite among crypto traders, where speculation is more focused on future ether valuations than holding their long-term capital in btc.
Reading: Bitcoin ether drop than
Conversely, an eth/btc bear cycle is usually accompanied by a drop in altcoins and declining eth market share. As a result, traders are looking to btc for safety, showing their risk-averse sentiment within the crypto industry.
ethereum tvl removal
Interest in the ethereum blockchain skyrocketed during the pandemic as developers began turning to it to create a wave of so-called decentralized finance (defi) projects, including peer-to-peer sharing and lending platforms.
resulting in a boom in total value locked (tvl) within the ethereum blockchain ecosystem, rising from $465M in March 2020 to $159B in November 2021, an increase of over 34,000%, according to data from defillama .
Interestingly, ETH/BTC surged 345% to 0.08, a 2021 peak, in the same period, given an increase in demand for transactions on the Ethereum blockchain. However, the pair has since dropped over 35% and was trading for 0.057 BTC on June 26.
the eth/btc crash coincides with a massive drop in ethereum tvl, from $159bn in November 2021 to $48.81bn in June 2022, led by fears of contagion in the defi industry.
Furthermore, institutions have withdrawn $458 million this year from ethereum-based investment funds as of June 17, suggesting that interest in ethereum’s defi boom has been waning.
bitcoin struggling but stronger than ether
bitcoin has faced minor downsides compared to ether in the ongoing bear market.
the price of btc has fallen almost 70% to around $21,500 since November 2021, compared to ether’s 75% drop in the same period.
Furthermore, unlike ethereum, bitcoin-focused hedge funds have seen inflows of $480 million so far this year, showing that btc’s decline has done little to curb its demand among institutional investors.
ETH/BTC downside targets
Capital flows, coupled with a growing mistrust of the defi sector, could continue to benefit bitcoin over ethereum in 2022, creating further downsides for eth/btc.
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From a technical perspective, the pair has held above a confluence of support defined by an ascending trend line, a fibonacci retracement level at 0.048 btc and its 200-week exponential moving average (200-week ema). ; the blue wave in the chart below) near 0.049 btc.
In a rebound, ETH/BTC could test the 0.5 Fib line next near 0.062. Conversely, a decisive break below the support confluence could mean a decline toward the 0.786 Fib line at 0.027 in 2022, down more than 50% from the price on June 26.
the eth/btc breakdown could coincide with an extended eth/usd market decline, mainly due to the Fed’s quantitative tightening that has recently pushed crypto prices lower against the US dollar.
Depth of historical $eth bear market correction:• -72% • -94%• -82% (and counting) read more about #eth market cycles here: https://t.co /5hio7sc1n6#crypto #ethereum pic .twitter.com/7ol0q3xm9g
Conversely, weaker economic data could cause the Federal Reserve to cool off in its wave of tightening. this could limit the downward bias of ether and other crypto assets in the dollar market, according to global markets.
the company noted:
but with ether never regaining its all-time high against bitcoin since June 2017 despite a strong adoption rate, the eth/btc pair could remain under pressure with the 0.027 target in the offing.
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