Why is Ethereum being outperformed by Bitcoin? Historical pattern changing in 2023

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key takeaways

  • Ethereum has historically outperformed bitcoin in bull runs
  • Pattern Flips to Start the Year With Bitcoin Dominance on the Rise
  • Our analyst Dan Ashmore jumps on-chain to look at history, and show how and why the pattern is changing

flipping, huh? Nothing quite likes a debate within crypto circles.

referring to a scenario where Ethereum flipped Bitcoin For the number one spot in the cryptocurrency ranks, flipping is anything from inevitable to delusional, depending on who you ask.

I’m not sure I want to walk on the eggshells of that debate for fear of my Twitter DMs, but I noticed something interesting today while digging into the data for Ethereum vs Bitcoin.

Ethereum is closely related to bitcoin

First of all, the obvious. Ethereum is incredibly correlated with bitcoin because, well, it’s a cryptocurrency, and the fate of every crypto is tied to the orange coin. We know this by now.

The graph below shows how tight this relationship has become since Ethereum went live in 2015.

But when these two best friends follow each other on the price chart, there are scenarios where they diverge a bit. The famous ETH/BTC ratio is one that especially Ether fans keep a close eye on.

It reached close to 0.15 in June 2017 before freeing up to 0.025 before the end of the year. Today, it trades at around 0.07.

Ether fares better in a bull market than bitcoin

You may have noticed that the previous ETH/BTC chart closely resembles the shape of the crypto market as a whole through its many ups and downs.

I plotted the bitcoin price against this ETH/BTC ratio. In fact, the ratio rises as bitcoin rises, and falls as bitcoin falls. Using bitcoin price as a proxy for the industry as a whole, it turns out that the ETH/BTC ratio tends to rise in bull markets and fall in bear markets.

It makes sense. Bitcoin is often referred to as the boomer coin. I quite like it that way, even if it’s meant as an insult. But it’s an understandable moniker because compared to altcoins, bitcoin moves like a pensioner during bull markets.

Ether may be the biggest of the altcoins, but it still outperforms bitcoin when the bulls are out to play.

On the other hand, bitcoin fared better when the party was over. And by better performance, I mean it drops 60% as opposed to 70%. But hey, that’s for another day.

The pattern is flipped in 2023

But the price charts are showing otherwise. One month into the new year, bitcoin has risen while the ETH/BTC ratio has fallen – the exact opposite of what has happened historically.

I charted the ratio back in early November, when the Sam Bankman-Fried fun and games Revealed to the world and crypto plummeted, with bitcoin plunging to $16,000.

The chart shows that the pattern remained as you would expect, i.e. the ratio fell as crypto and bitcoin came back. But as soon as we turn the page to 2023, crypto market flipped And bitcoin soared. The only problem is that ETH hasn’t followed suit, with the ratio falling from 0.077 on Jan 11 to 0.068 currently, while bitcoin has surged from $17,400 to near $23,000 over the same period.

Why? Honestly, I’m not sure. that’s unusual.

Bitcoin is up 36% on the year while Ether is only up 29%. Yet judging by the returns of other altcoins, it probably has nothing to do with Ether. Many are outperforming bitcoin, while even the best performers are not doing as well as has been seen before (note that I removed Solana for scale purposes, which is up 125% so far this year). is, the following being destroyed by Sam Bankman-Fried and links to several projects that fled the blockchain late last year).

Seriously, this is a remarkable rise for bitcoin from the depths of bear market pain. The rest of the market is not quite ready to forget the Armageddon of 2022, which saw many altcoins drop by over 90%.

Ethereum wasn’t as bad, but still fell from its all-time high of around $5,000. The free money and stimulus packages of the pandemic are over. It is a different climate now, and campaigning for altcoins is proving more challenging.

Web3’s story has faltered. NFT has been crushed. There is no doubt that the story around ETH is busted. I wrote about institutional adoption will retreat into crypto, and how it will take a long time for the sector’s reputation to recover.

This is true for bitcoin. Perhaps this is even more true for ETH and altcoins, which have even more to do to regain investor confidence.

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