Author: BitpushNews Mary Liu
Due to the speculation that the spot Bitcoin ETF may be approved in the United States, Bitcoin has rebounded for two consecutive weeks, while Ethereum has shown a relatively moderate increase. The price of Ethereum relative to Bitcoin (ETH/BTC trading pair) continues to decline.
According to TradingView's data, as of the time of writing, the ETH/BTC ratio is 0.05182, the lowest since mid-2021, approaching the low point of about 0.049 in June 2022. The last time this ratio fell below 0.049 was before May 2021.
Historical data shows that the high point of ETH/BTC usually occurs during periods of excellent performance for Ethereum in bull markets, reaching as high as 0.085. However, in bear markets, the situation reverses, with Bitcoin usually taking the lead.
At the same time, Bitcoin's increase continues to outpace most altcoins, driving its dominance to rise to 54.4% of the total crypto market value, the highest level since April 2021. A ratio exceeding 50% means that Bitcoin's market value exceeds the sum of all other cryptocurrencies.
The chart data shows that the dominance index has fluctuated between 39% and 49% over the past two years, until it broke through this range in mid-June. This breakthrough coincided with the news of BlackRock's application for a spot BTC ETF in the United States, when the price of Bitcoin rose to over $30,000.
Why is Bitcoin's increase far ahead?
An analyst pointed out that due to the speculation about spot ETFs and the narrative of hedging, Bitcoin's increase is far ahead.
Recently, with Grayscale's recent legal victory in court, and traditional financial giants such as BlackRock, Fidelity, and Ark Invest applying for Bitcoin spot ETFs, the community's enthusiasm is high. Industry insiders believe that the approval of ETFs by the U.S. Securities and Exchange Commission (SEC) is almost a foregone conclusion, which may unleash a new wave of demand for Bitcoin.
Crypto market analyst and author of Crypto Is Macro Now, Noelle Acheson, stated in her daily newsletter that the rise in Bitcoin dominance can be explained by market cycles and the attractiveness of Bitcoin as a lower-risk asset compared to altcoins (including ETH).
Acheson pointed out, "Bitcoin often leads the cryptocurrency market early in a cycle, only losing its dominance when investors become more accustomed to the risk curve and smaller altcoins emerge."
Ethereum lacks an upward narrative
According to a report released on Monday by digital asset management company CoinShares, investment products based on Bitcoin and Solana have seen inflows of approximately $112 million and $43 million respectively this month, while funds based on Ethereum have seen outflows of $4.7 million.
In fact, according to CoinShares' report, Ethereum has seen the highest outflow of funds this year, totaling $1.19 billion, followed by Tron.
CoinShares research director James Butterfill attributed the difference in the amount of funds for BTC and Ethereum to people's "expectations for a spot Bitcoin ETF" and "continuing concerns about Ethereum."
Noelle Acheson also pointed out that Bitcoin has the narrative of ETFs and hedging as tailwinds, while Ethereum faces unfavorable factors such as regulatory indifference and upgrade uncertainty. Although Ethereum has been at the forefront of the decentralized finance (DeFi) movement and pioneered smart contracts, network congestion and high transaction fees have been ongoing issues, especially with the emergence of new competitors in the field.
An analyst at Bitfinex stated in a report that the primary bullish narrative in the market is BTC ETF products, while Ethereum lacks a convincing long-term narrative.
Earlier this month, six Ethereum futures-based ETFs were launched in the United States. However, the opening trading was lackluster and failed to generate the same level of excitement and trading volume as the first BTC futures ETF, ProShares BITO, launched in October 2021.
David Duong, research director at Coinbase, stated that the total first-day trading volume for top ETH futures ETFs was less than $1.5 million. In contrast, according to Bloomberg data, BITO's trading volume on its founding day exceeded $1 billion. In addition, the net inflows into these ETH futures ETFs were less than 2% of BITO's.
Benjamin Jarvis, co-founder of analysis firm JLabs Digital, stated in a Bloomberg interview, "Institutions may be more willing to invest in spot Bitcoin ETFs because they see lower risk in spot Bitcoin compared to Ethereum futures."
Normal capital rotation?
Data shows that over the past month, the price of BTC has risen by 32%, while ETH has only risen by 12%. Looking at a longer time frame, Bitcoin's price has doubled this year, while ETH has risen by about 50%.
Technical indicators analyzed by Crypto Daily show that Ethereum currently faces resistance levels at $1,794 and $1,955, while support levels are determined to be $1,308 and $1,470, indicating that Ethereum may find some support near these price points. A report from Bitfinex stated that the market is in the early stages of a bull market, with Bitcoin leading the way first, followed by capital rotation as investors seek beta trades such as Ethereum, which is normal.
John Glover, Chief Investment Officer of cryptocurrency lending institution Ledn, believes that historically, when the price of Bitcoin rises, funds begin to flow into altcoins. This means that the launch of one or more spot Bitcoin ETFs is likely to trigger the next major bull market for the entire crypto ecosystem.
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