Ether (ETH), the native cryptocurrency of the Ethereum blockchain and the second largest overall, hit a new record high early Wednesday and extended its lead over the market leader Bitcoin (BTC).
The trend is likely to continue as the ETH / BTC (the Ether-Bitcoin price ratio) hits a multi-year high, indicating increased capital flow into the ether.
According to CoinDesk 20 data, ether rose to $ 2,800, beating the high of $ 2,762 hit on Wednesday.
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The cryptocurrency has gained 43% so far this month and is 7% decoupled from Bitcoin. The ETH / BTC ratio has risen to a 2.5-year high of over 0.050, confirming a clear upward trend on the technical charts.
“ETH / BTC has broken out after several years of consolidation and the trend looks very strong,” said Pankaj Balani, co-founder and CEO of the Singapore-based Delta Exchange. “There is no further resistance here, and we expect the ETH / BTC to enforce 0.10 at some point.”
The upshot is that Bitcoin’s ongoing capital rotation into ether is likely to continue in the coming months.
A report by digital asset manager CoinShares earlier this week showed that ether funds and investment products raised $ 34 million last week, while bitcoin funds lost $ 21 million.
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“Demand is shifting,” CoinShares chief strategy officer Meltem Demirors told CNBC earlier this week, adding that capital is moving from one asset to another.
Raoul Pal, CEO and co-founder of the Real Vision Group, also assumes that the ether will continue to outperform.
“At this point in the risk cycle and with the upcoming Ethereum 2.0 (cheaper fees and less supply), I’m having trouble not selling all of my BTC and moving my entire core position to ETH,” Pal tweeted earlier this month. “To be clear – I’m a massive BTC bull, but I think ETH is currently the better asset allocation for performance.”
The story goes on
Developers expect the Ethreum 2.0 upgrade or switch to a consensus evidence mechanism by the end of this year or early next year. Thereafter, Ethereum founder Vitalik Butrin plans to implement a “sharding” upgrade to expand Ethereum’s capacity to process transactions by dividing the database into 64 mini-blockchains. This can lower transaction fees, increase network activity, and increase the demand for airwaves.
While the path of least resistance seems to be on the higher side for ETH / BTC, it may not be smooth sailing, said Lennard Neo, research director at Stack Funds.
“The breakout on the weekly chart is pretty significant with the next resistance at 0.09 in May 2018,” Neo said. “ETH / BTC can retest previous hurdle support at 0.04-0.045 before further gains unfold.”
Also read: Ether rises to new all-time high and JPMorgan indicators
A possible bull market correction in Bitcoin, the highest cryptocurrency by market value, cannot be ruled out and will likely result in a temporary decline in ETH / BTC. This is because a Bitcoin decline usually leads to larger drawdowns on ether and other alternative cryptocurrencies.
Bitcoin’s rebound from recent lows near $ 48,000 has stalled near $ 55,000 and buyers are refusing to intervene despite the Federal Reserve held onto its loose stance on Wednesday.
The weekly chart’s MACD histogram, an indicator for measuring trend strength and trend changes, has fallen below zero and is pointing to a bearish reversal for the first time since March 2020.
“A break of over $ 60,000 is needed to revive the bullish view,” said Balani.