The economics of ETH priced in BTC versus USD intrigues me. Perhaps I will pose this question to our Financial Analyst Graeme Tennant in an upcoming Market Analysis livestream.
Track with me…
Numerous cryptocurrency traders have watched with intrigue as a myriad of their favourite tokens have reached new all time highs against fiat currencies such as the US Dollar.
First it was Bitcoin in December 2020 that smashed through its January 2018 ATH (all-time high) of $19,876. Then ETH followed suit a month later. Both are currently setting new ATHs on a weekly basis.
But while numerous all-time highs are being set in US Dollar denominations, many traders believe that ETH has the ability to surpass its all-time high in the BTC market, set way back in June 2017. Most traders and analysts are eyeing out a price of 0.1btc per 1eth some time this year. While this is far from impossible, it does pose a number of things to at least consider…
Remember: the price of any cryptoasset in BTC will more or less reflect that asset’s USD price, or else you will have a considerable arbitrage opportunity – which wouldn’t take long to be equalised anyway.
To illustrate this point:
The price of ETH in BTC at time of writing is 0.037btc.
The price of BTC is $51,740.
51,740 x 0.037 = 1914
Which is, at time of writing, the exact USD price of ETH.
Now, coming back to that target of a new all-time high ETHBTC price being 0.1btc… in order for that to happen, either:
1) ETH would have to absolutely rocket in USD value to $5200 (0.1 btc with BTC at $52,000)
2) BTC would have to pull back significantly in addition to an increased ETH/USD price. (BTC at $40,000 and ETH at 0.1btc still puts ETH at $4000)!
Fundamentally speaking (which is not necessarily wise when trading) with so much interest in BTC at the moment I battle to see a pull back in the short-term. And even if we do, it looks like $47,500 offers first line of very strong support.
Taking that $4500 off the current price of BTC takes $83 billion off its market cap.
Even if 20% of that $83 billion went into ETH, it would “technically” only push the price up to $2100. I say “technically”, because the price isn’t determined evenly by market cap versus circulating supply, it’s simply determined by the buying pressure against the supply on global exchanges (this also goes for the fact that, “technically”, $83 billion wouldn’t actually be removed from the BTCUSD market, again, a price drop would only be determined by the selling pressure on exchanges – market cap v circulating supply is a funny old formula).
Point is though: Fundamentally, seeing ETH broach 0.1btc is no easy forecast.
If we consider ETHBTC’s all-time high was June 16th 2017, when BTC was $2485, it would not be an incorrect thesis to say that ETH has, in essence, decoupled from its BTCUSD correlation now that BTC is so high in US Dollar price, and so much has happened since that date.
And bear in mind that as time progresses, the USD price of BTC will likely increase as well, making it even more difficult for ETH to achieve a BTC price of 0.1btc.
Perhaps now ETH can simply be more accurately viewed as another hedge against governmental-controlled fiat?
Instead of trying to time a new all-time high ETH price in BTC, if that ever comes at all, perhaps we should simply use the ETHBTC price as an indicator for the strength of the ETH market?
And note: I am in no way a Bitcoin maximalist nor an Ethereum bear, I have an immense amount of respect for Ethereum and its place in crypto’s industry – dare I say: I love the project! I just think its token ETH should no longer be analysed in terms of the BTC market in order to determine its strength.
Merely things to consider when making your analyses. Keep researching!