THE KING OF ALTCOINS OUTPERFORMS THE KING OF CRYPTO
November is finally behind us and it was mostly a month to forget that didn’t quite live up to the expectations of investors and enthusiasts alike. The King of cryptocurrencies (BTC/USDT) closed the monthly candle 7% in the red, although the total crypto market capitalization only decreased by two billion dollars over said period, which actually makes up a slightly surprising finding that we had to double-check.
In other words, Bitcoin Dominance fell down from 44% on the 1st of Nov to 41.6% at the end of the month. Meanwhile, Ether (ETH/USDT) recorded a fairly decent result gaining 8% in value, which meant that the second largest crypto by market cap (currently at $521B with Dominance at 22.4%, according to coinmarketcap.com) started December trading for approximately $4600.
At the beginning of this month, we have been watching ETH continue closing the gap on BTC even farther, and presently the ETH to BTC ratio sits at its highest valuation since … February 2018. So, as many of us must be wondering at this point, why exactly is that happening? Are we really seeing the Flippening take place (Ethereum replacing Bitcoin as the largest crypto) right before our eyes?
FIVE MAIN REASONS WHY ETHER HAS BEEN OUTPACING BITCOIN
There obviously must be a few more reasons for such occurrence, but after a deep reflection we have selected just the five that, in our opinion, have been playing a significant role in Ethereum gaining ground on Bitcoin over the recent seven weeks.
First of all, in spite of the ETH 2.0 implementation being delayed by another 6 months, that is (at least) until Summer 2022, the ETH founders have managed to provide investors with a fairly optimistic, albeit only temporary, potential solution called EIP-4488. If implemented, the new Ethereum Improvement Proposal will seek to farther reduce Layer 2 gas fees by slashing calldata costs.
Secondly, we need to go back to the ETH/BTC chart to realize that, between the 1st of September and the 19th of October, Ether actually lost 25% in value in relation to Bitcoin. The 0.06 mark turned out to be the reversal point, and since the 20th of October ETH has outperformed BTC by a whooping 44.5%. The ‘rebound effect’ must have played some role in that at least.
Reason number 3, provided that we are on the right track, has to do with human psychology. For many average investors, the price of BTC is certainly a barrier to entry, as they simply don’t feel comfortable spending their savings to only receive a small fraction of Bitcoin in exchange, so they end up looking for the second best crypto and inevitably find out about ETH, whose price per unit surely seems like a much more attractive investment option, and one with a greater upside potential.
Reason number 4, the gas fees. Anybody who tried using Ether this year must have uttered a couple of indecent words when having to pay the ridiculously high fees, but the silver lining is that these same overinflated transaction costs have been preventing a number of Ethereum investors, especially the smaller ones, from converting their tokens into other assets, fiats, or even from panic selling.
It’s sufficiently logical, we believe, that if one only has got a couple of hundred dollars in ETH, they will certainly think twice before paying $50 or more in order to do anything with their coins. So, in this way they become involuntary hodlers who simply choose to wait for the fees to be fixed instead. And the last reason, for which we will turn to the charts now.
TECHNICAL ANALYSIS
We published our Bitcoin analysis yesterday (link here), so let’s just sum it up in one sentence: after the latest declines in price, the King of crypto has got a real mountain to climb to reach its current ATH again, as it’s sitting 27% below the record valuation of $69k.
Ether, on the other hand, is trading merely 9.2% below its all-time high of $4878, which was recorded exactly four weeks ago. Not only that, but Ether’s price is also above all of its crucial Moving Averages on the daily, as well as on top of nearly all of its important resistance zones.ETH’s path to setting a new ATH simply looks much easier compared to Bitcoin’s, and you don’t even need to know your TA in order to notice that. Over the recent three weeks, Ether has been trading sideways and it might be getting ready to take off in the coming days or weeks, provided that Bitcoin doesn’t experience yet another flash-crash that takes its price below the 200-day Moving Average. RSI is neutral at 50 at this moment, and as soon as MACD Histogram bars turn positive, Ether’s chart will look incredibly bullish once again. Another ETH update will appear this Sunday, in which we are going to focus more on the token’s on-chain data and on… the Polygon’s token MATIC. Happy Investing/Trading!
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
