A good portion of its gains against Bitcoin have come about throughout the past couple of weeks, as ETH has been caught within a strong uptrend that may have been the impetus for the latest market-wide rally.
One crypto-focused venture capitalist is now noting that historical market cycles seen between Ethereum and Bitcoin are likely to continue directing significant amounts of capital towards ETH – possibly allowing it to outperform BTC over a macro time frame.
Ethereum continues gaining value against Bitcoin
Since the start of 2020, Ethereum has outperformed Bitcoin by over 60 percent, climbing from 0.018 BTC in early-January to its current price of 0.029 BTC.
This has been driven by a confluence of factors, including the DeFi sector’s growth, yield farming, ETH 2.0 anticipation, and some hype surrounding EIP-1559.
All of these factors have given rise to a plethora of narratives regarding the macro strength of the second-largest cryptocurrency – and there is some merit to them.
Although musings about ETH 2.0’s launch and the potential passing of EIP-1559 both remain speculative, there’s no questioning that the DeFi sector has driven value to Ethereum.
This can be seen while looking towards the transaction volume, fees, and network participation on the Ethereum blockchain.
It has also led to direct inflows of capital into ETH, as many users transact between DeFi tokens using Ethereum on platforms like Uniswap and Curve.
Historic market cycles likely to drive ETH’s price higher, claims VC
Chris Burniske, a partner at Placeholder, explained in a recent tweet thread that there is a striking connection between Ethereum and Bitcoin’s market cycles – with the two assets feeding into each other.
While explaining the cycles, he said:
“Since ETH is more illiquid & higher risk than BTC, it tends to overshoot BTC’s gains in a bull market, ultimately ending up higher than it started in ETHBTC terms… then allowing more BTC to be bought with ETH, and so the cycle continues.”
He concluded that this will result in Ethereum gaining value against Bitcoin over a long-time frame.
“And then since September 2019, ETH has been gaining against BTC, with a breakout above 0.025 BTC in the last week. My point is the cycles, the two reinforcing each other in bull markets, and on a long time frame, ETH being set up to continue to gain on BTC.”
Because Ethereum’s market cap is significantly smaller than that of Bitcoin, this will also allow it to climb against its BTC trading pair with greater ease – especially in bullish market conditions.
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