Continued Decline in ETH/BTC: Is It a Buy Opportunity

[TL；DR]:

• The ETH/BTC ratio has been declining and is now approaching a critical support level.
• Bitcoin attracts significant capital inflows due to its “digital gold” status, while Ethereum faces competition and market pressure.
• With the current price near a support zone, a short-term rebound is possible. Investors can consider phased buying while waiting for long-term value recovery.

Introduction

In recent years, the continued decline of the ETH/BTC ratio has left many Ethereum holders with a less-than-ideal investment experience. As a key metric in the cryptocurrency market, the ETH/BTC ratio reflects not only Ethereum’s performance relative to Bitcoin but also changes in market sentiment and capital flows. For investors who are optimistic about the long-term prospects of the Ethereum ecosystem, this decline has been a significant source of pressure. Bitcoin’s strengthening position as “digital gold” has further highlighted Ethereum’s short-term struggles.

However, every market downturn may also present new opportunities. For investors who can calmly analyze trends and patiently wait for the right moment, the current challenges might just be an ideal time to prepare for future gains. In the following sections, we will explore the market logic behind the ETH/BTC ratio and provide valuable insights and strategies for investors.

ETH/BTC Market Analysis

Understanding the basics of the ETH/BTC ratio and its impact on market sentiment naturally leads to examining the current market situation. After all, theory is only valuable when it guides practice, and practical insights come from analyzing real-world scenarios. Let us now focus on the specific performance of the ETH/BTC ratio.

(Source: Tradingview)

Before 2023: Range-Bound Period

From 2021 to early 2023, the ETH/BTC ratio fluctuated between 0.055 BTC and 0.075 BTC, reflecting a period of range-bound market activity. During this time, Ethereum and Bitcoin’s performances were relatively balanced, with no clear directional trend and prices oscillating within a set range.

Starting 2023: Downward Trend

In 2023, the ETH/BTC ratio entered a clear downward trend, moving along a descending channel marked by progressively lower highs and lower lows. Whenever the price approached the channel’s upper boundary (around 0.045 BTC), it faced selling pressure, causing a retreat. When it neared the midline, there was some rebound, but the overall pressure on ETH increased, with each price recovery capped by the channel’s upper resistance.

Current Performance: Nearing the Lower Boundary

Currently, the ETH/BTC ratio has dropped to 0.03189 BTC, approaching the channel’s lower boundary. This is a critical support level and could offer some price stabilization. Given the proximity to this support zone, the potential for further decline may be limited, creating a short-term opportunity for a rebound. This might be the right time to watch for potential reversal signals.

When nearing the lower boundary of the channel, the market may present a reversal opportunity. Based on past price behavior, the ratio has seen short-term rebounds whenever it reached the midline. A similar rebound might occur at this stage. If successful, ETH/BTC could test the midline or upper boundary, providing potential opportunities for short-term trades.

On the other hand, if the price rebounds and breaks above the channel’s upper boundary, it could trigger a medium-term trend reversal, where Ethereum might outperform Bitcoin and enter a sustained upward phase. Thus, the current market presents both short-term rebound potential and medium-term trend reversal opportunities. Investors should closely monitor key support and resistance levels for any significant breakthroughs.

Exploring the Drivers Behind ETH/BTC’s Decline

Bitcoin’s Dominance Reinforced

Amid rising global economic uncertainties, Bitcoin’s appeal as a “safe-haven” asset has grown stronger. Both institutional and retail investors increasingly prefer Bitcoin, especially during turbulent times, where its stability stands out.

(Source: CMC)

As of January 23, 2025, cumulative net inflows into U.S. Bitcoin spot ETFs reached $3.926 billion, with total assets under management at $12.132 billion, accounting for 5.90% of Bitcoin’s market cap. In contrast, U.S. Ethereum spot ETFs saw only $279 million in cumulative net inflows, with assets under management at $1.19 billion, representing 3.04% of Ethereum’s market cap.

This capital allocation disparity highlights differences in market confidence and sentiment. Bitcoin’s early market leadership and widespread recognition have made it the most attractive cryptocurrency. Its decentralized nature and limited supply have established Bitcoin as “digital gold” and the preferred asset for global and institutional investors.

(Source: Tradingview)

Bitcoin spot ETFs’ cumulative inflows of $3.926 billion far surpass Ethereum’s $279 million, reflecting Bitcoin’s clear advantage in attracting funds. With total assets under management of $12.132 billion, nearly ten times Ethereum’s $1.19 billion, Bitcoin’s dominance in the market is evident. Moreover, Bitcoin spot ETFs account for 5.90% of Bitcoin’s market cap, much higher than Ethereum’s 3.04%, underscoring Bitcoin’s stronger market penetration and investor confidence.

Ethereum’s Challenges and Transformations

While Ethereum remains the king of smart contract platforms, it faces increasing competition. Emerging blockchain platforms like Solana and Avalanche, with their high performance and low transaction fees, are drawing developers and users.

（Source: defillama）

Additionally, Ethereum’s recent transition to Proof of Stake (PoS), while beneficial for its long-term sustainability, has introduced short-term supply pressures, increasing market uncertainty. The unlocking of staked ETH has added to market supply, leading some investors to cash out, which further exerts downward pressure on prices.

(Source: Tradingview)

Meanwhile, competitors are attracting projects and users with generous incentives, intensifying the competition for market share in DeFi and NFTs. These dynamics have heightened the challenges for Ethereum in maintaining its platform value.

Investment Insights: Finding Opportunities in ETH

Despite these challenges, Ethereum continues to demonstrate its value and strength in the blockchain ecosystem, as seen through its Total Value Locked (TVL).

（Source: defillama）

While the prolonged decline in the ETH/BTC ratio may worry some investors, it also presents an opportunity for long-term investors to accumulate positions gradually. Markets are ever-changing, and patience often pays off.

In uncertain market environments, a phased buying approach is an effective way to reduce risk. Maintaining sufficient liquidity to navigate potential market fluctuations provides investors with greater flexibility. This can be likened to “stockpiling resources in winter to prepare for the arrival of spring.”