Ethereum has been steadily declining against Bitcoin since September of 2022, when it briefly peaked at around 0.085. At the time of writing this article, ETHBTC is changing hands at 0.038, which is the lowest level since April 2021.
The underperformance of Ethereum relative to Bitcoin is even more striking if we consider how far the two coins are trading from their all-time highs. Bitcoin is currently just 1% below its historical peak, while Ethereum is trading a whopping 40% below its all-time high.
Does Ethereum’s relatively low price compared to Bitcoin mean that now is a great time to buy Ethereum or convert your BTC into ETH?
Why Ethereum could be a better opportunity than Bitcoin right now
If you’re interested in buying Ethereum, current prices could present a compelling opportunity. As a large crypto asset, ETH is likely a safer bet than smaller altcoins, but could still outperform BTC.
ETH price action
After the victory of Donald Trump in the U.S. presidential elections, the cryptocurrency market saw a surge of bullish momentum which resulted in new all-time highs for Bitcoin. Although ETH is still trading substantially lower than its all-time highs, it has actually seen a bigger price increase than Bitcoin during the most recent crypto market rally.
From a long-term perspective, we can see that the ETHBTC pair was in a descending channel for over two years, with a series of lower lows and lower highs. The price broke out to the downside in September, and is currently attempting to re-test the lower boundary of the channel, which is sitting at right around 0.040. If ETH can successfully break through this resistance level, we can expect ETH to continue gaining ground against BTC.
As for Ethereum’s performance against the US dollar, there aren’t any notable resistance levels for ETH until $4,000. This resistance came into play in March and May earlier this year, and prevented ETH from making further gains even though Bitcoin managed to post new all-time highs.
In the short-term, it appears that ETH is positioned well against USD, and a rally to the $3,900 – $4,000 range is certainly a possibility as long as bulls continue to have the upper hand in the cryptocurrency market.
More favorable regulatory environment in the US
Ethereum could also be a good buy right now if altcoins begin posting stronger gains than Bitcoin. This is a solid possibility, as the Trump administration is expected to be less stringent on crypto regulation than the Biden administration, which could boost altcoin markets.
After all, Bitcoin really hasn’t had any notable regulatory controversy in the United States after the approval of spot Bitcoin in January, while the SEC has been aggressively pursuing regulatory actions against crypto projects and exchanges and alleging that many of the largest crypto assets on the market today are unregistered securities.
If you want to learn more about how Bitcoin and Ethereum stack up against each other on a more fundamental level, make sure to check out our article exploring Bitcoin vs Ethereum.
Ethereum continues to dominate the smart contracts sector
Another factor going in favor of Ethereum is that it continues to be the dominant smart contracts blockchain platform, especially when it comes to the decentralized finance sector. According to data from DeFi Llama, the Ethereum mainnet has a $54.8 billion in TVL (total value locked). Meanwhile, the next closest competitor (Solana) has a TVL of $7.1 billion.
It’s also worth keeping in mind that two of the top 10 largest blockchains in DeFi are Base and Arbitrum, which are layer 2 platforms that function on top of the Ethereum mainnet.
The Ethereum project is banking on layer 2s to drive scalability and make the user experience more similar to high-performance blockchains such as Solana while maintaining the extremely robust security of the Ethereum mainnet.
What could go wrong for Ethereum?
Previously, one of the most bullish factors for Ethereum was that the ETH supply was steadily decreasing due to EIP-1559, which is one of the three parts of the “Ethereum triple halving”. Although EIP-1559 is still active, the demand for transaction on Ethereum recently hasn’t been strong enough to keep the ETH supply deflationary, and the amount of coins being minted to reward stakers has been outpacing the amount of coins burned through transaction fees.
In the last 30 days, 40,321 new ETH coins entered circulation, which represents a 0.40% supply growth on a yearly basis.
IMAGE SOURCE: ultrasound.money
Another negative scenario that Ethereum investors should keep in mind is the continued growth of the Solana ecosystem, which is especially dominant when it comes to meme coins. New meme coins that generate hype in the crypto markets now tend to be launched on Solana, even though Ethereum does still have some heavy hitters such as Shiba Inu and Pepe.
Solana’s growing momentum compared to Ethereum is also evidenced by the fact that SOL recently reached new all-time highs against ETH.
The bottom line
We think that Ethereum is certainly worth consideration at the moment, as it seems to be positioned well to make gains against USD and could also outperform BTC in the short to medium term, especially if market sentiment on altcoins continues to improve. Adjusting your crypto portfolio to have a bit more exposure to ETH could prove to be a good decision, although we’re currently not seeing signals from the markets that would justify a more “all-in” move into ETH.
If you want to learn more about opportunities in the crypto markets, make sure to check out our list of the best crypto to buy now.
Source: https://coincodex.com/article/52851/should-you-convert-btc-to-eth/