Ether-Bitcoin Ratio Hits Five-Year Low as Traders Shift to Safer Investments

What You Need to Know:

The ETH/BTC ratio has fallen to a five-year low of 0.02193.
Ether has experienced a 39% decline compared to Bitcoin this year.
This marks the first instance of ETH lagging behind BTC following a Bitcoin reward halving event.

Ether (ETH) has seen a significant 39% drop this year in relation to Bitcoin (BTC), the leading cryptocurrency. This has pushed the ratio between them to its lowest point in nearly five years as a tightening macroeconomic backdrop impacts the second-largest cryptocurrency.

Currently, 1 ETH equals approximately 0.02191 BTC. This is the lowest ratio since May 2020 when Ether traded at around $200 and Bitcoin was just under $10,000. Presently, the ETH price is around $1,800, and Bitcoin is approximately $82,000.

Market Context

The adverse performance is especially noteworthy as this is the first time ether has weakened against Bitcoin within a year following a Bitcoin reward halving. On April 20, 2024, the earnings for Bitcoin miners for confirming blocks were halved to 3.125 BTC.

In past halving cycles, Ether typically outperformed Bitcoin within the next 12 months. However, this time, the ETH/BTC ratio has plummeted by over 50%.

This trend can be attributed to the ongoing threats of a trade war, persistent inflation, and global bond yields, prompting investors to favor more liquid and less risky assets. Gold has also reached record highs, while Bitcoin is increasingly viewed as a safer option compared to Ether.

Indeed, this relative performance showcases one of Ether’s weakest quarterly outcomes against Bitcoin in several years, as noted by data from Glassnode. The last time Ether underperformed Bitcoin to this degree was in Q3 2019, when the ratio fell to 0.0164, representing a 46% quarterly decline.

Current Implications

This ongoing slump underscores the weakening trajectory of Ether, particularly set against other layer-1 assets. The SOLETH ratio, which measures Solana’s (SOL) value against Ether, has risen 24% year-to-date to 0.07007, highlighting Solana’s performance superiority despite its own 35% decline in the same timeframe.