key takeaways
- Ethereum has fallen against bitcoin so far this year
- This is unusual as the market has been bullish, and altcoins have outperformed bitcoin in bull markets.
- Nonetheless, writes our analyst Dan Ashmore, bitcoin reflects everything in and about the Maxis space.
- Their celebration also forgets the fact that Ethereum has still crushed Bitcoin over the last five years.
- Despite Ethereum’s Outperformance, Ashmore Explains Why Bitcoin Is The Only Crypto Asset For Him Despite Disdain Of Bitcoin Extremism
i am one Bitcoin Investor. But there are few things more toxic in the cryptocurrency space than bitcoin that berates others for investing in individual coins.
Of course, the people who do this are very few in number. Colloquially known as bitcoin extremists, this group is just so loud and aggressive From which it appears that they are many in number. they are not.
Do I personally invest in crypto beyond bitcoin? Not really, beyond a little fun on the side. I am a boomer investor and hence altcoins have never made it into my long term portfolio. But that doesn’t mean I have to spend my nights online scolding people for whatever they do with my money. This is really strange behaviour.
Ethereum biggest target
EthereumBeing the second largest cryptocurrency on the planet, it is naturally one of the biggest targets of these maxies, who usually travel in packs through the virtual world but are rarely seen outside the internet in broad daylight. .
And ethereum is the reason I’m producing this piece today because Twitter, the ever-positive kingdom in which these maxims are found, is alive with celebration that bitcoin is trending up against ethereum, the latter over the past few weeks. Falling sharply in day against bitcoin this year and nearing its bottom.
A few things on this. And again, I’m a bitcoin investor so I really have no reason to be biased here (or anything, I tend to be in the opposite direction).
But sharing the 2023 chart is guilty of cherry-picking a bit. It’s no secret that Ethereum has absolutely crushed Bitcoin over the past few years, during the post-pandemic bull run of 2020 and 2021.
To be precise, since April 2020, it has gained 2.53x against bitcoin.
Ethereum, like most altcoins, outperforms bitcoin in bull markets and underperforms in bear markets. It’s no secret and makes intuitive sense – it’s forward on the risk spectrum and essentially trades like a lever on bitcoin. There is nothing surprising in this.
And so it makes sense that Bitcoin lagged Ethereum during the bull run of 2020 and 2021. But look at the chart below since bitcoin’s all-time high in November 2021 (we can use this as a marker for a top in the crypto market): it has been fairly stable, down only 3.5%, according to Cryptoland. Almost negligible numbers in an unstable world.
The collapse of ETH vs BTC in 2023 also doesn’t really look overly dramatic with a little zoomed out and a wider y-axis. It’s all about perspective, isn’t it?
So ETH crushed BTC in the last bull market, and more or less tracked it in the bear market. Overall, this isn’t much cause for celebration for Maxi.
Why am I holding bitcoin?
This begs the question: why am I holding bitcoin on Ethereum? Well, I believe in the asymmetric return profile of bitcoin and I like the way it fits in with my portfolio. I’m a boomer investor at heart, a lover of diversification, and a big fan of the old portfolio allocation study.
Stocks have been and have always been the cornerstone of my portfolio, but bitcoin presents itself as a good diversifier along with a few other asset classes.
I am not that much bullish on Ethereum long-term. To be honest, I’m not sure I fully understand it yet. My knowledge of bitcoin is deep and, ever since I entered the field in 2017, I have been curious about its macro implications and how unique it is. Ethereum is more technical and, for me, I am less clear about its place in the world.
That’s not to hammer Ethereum. Like I said, I’m not sure I fully understand it, even having bought my first ETH six years ago.
And more importantly, past performance is not an indicator of future success. Perhaps the last few months have been quite indicative of this, which I will dig into in the final section.
Why is bitcoin doing better now?
It is certainly noteworthy that this year bitcoin has rallied against its counterpart (did I say almost rival!) given that the market has rallied across the board. Usually, this happens when ETH has made a profit.
I’d love to explain why, but it’s not that simple. What I think is that it summarizes how unique the current market environment is. We have a nasty mix of inflation (despite easing in recent months) and high rates, while the world fears a recession.
Bitcoin and Ethereum have never existed in a market environment like this before – until last year, they were never around anything other than a raging bull market in the financial sector, all risk assets since the launch of Bitcoin. There was an explosion. GFC in 2009.
As everyone knows bitcoin and ethereum is a low rate, up-only market. So we should keep this in mind when thinking (pun very intended) about why market trends are changing – the sample space is very small here and we’ve seen a lot since the Federal Reserve started raising rates last year. Undoubtedly the transition to a new environment has seen. ,
The flip side of this is that this year’s bounceback comes after an incredibly painful period in the crypto market. There could be a lot of fear and PTSD after the 2022 bloodbath, which will drive the market back to altcoins.
Most altcoins provide minimal or no value, and are therefore nothing more than a byproduct of the low rate environment that prevailed since the GFC until last year. This shift by the Fed amounts to a structural change and it is certainly hard to imagine the kind of gains it brought in years past when T-Bills were available to investors at north of 4% while the tech sector largely but was struggling through retrenchments and collapsing stock. prices.
This could contribute to bitcoin moving faster than altcoins, including Ethereum, which it did in previous periods of rising prices. The crypto space could have more permanent damage this time around, considering the high-profile scandals of FTX, Celsius, LUNA and all the other cowboys that threw the entire space into a circus.
So just because bitcoin has underperformed Ethereum over the past six years doesn’t mean it will continue to do so in the future. Who knows, this nascent industry is barely a few years old.
But regardless of speculation about the future, bitcoin’s poor performance against Ethereum over the past half-decade means that bitcoin maxis should really stop and celebrate ETH’s year-to-date low against BTC. Must think before. ,
Then again, thinking is not a favorite pastime of that group.