On Friday morning, ETH prices moved sideways against the U.S. dollar, rising a measly 0.03%.
This brought the Ethereum to USD exchange rate to $835.90. But that number is completely boring. I am much more interested in the Ethereum to Bitcoin rate, which rose 1.83% to 0.1 BTC. Here’s what I find fascinating.
The ETH/BTC ratio only jumped above 0.1 BTC in January 2018. It was an important milestone because it recognized that Ethereum prices were moving independently from Bitcoin. Investors weren’t lumping the two cryptos together.
This decoupling is crucial to Ethereum’s long-term success.
Investors need to see ETH as fundamentally different than Bitcoin. If they can treat it as a hedge to Bitcoin, run to it in times of uncertainty, and insulate it from Bitcoin’s woes—then we know an Ethereum rally is genuine.
Ethereum Price Chart
However, investors got something like collective amnesia from the recent market crash. They are treating Bitcoin Cash as the main counterweight to Bitcoin, rather than Ethereum. As a result, ETH and BTC prices are back to moving in sync.
Today’s uptick of the ETH/BTC rate gives me some hope that investors might come to their senses, but one data point is far from conclusive. I need to see a true decoupling before I get excited.
Without the decoupling, investors could flock to Bitcoin in a recovery. This would cause a precipitous fall in the ETH to BTC ratio, starting a vicious cycle that locks Ethereum prices below $1,000.
I visualize the crypto market as an island with only two bridges from the mainland (fiat currency, in this example): Bitcoin and Ethereum.
If investors choose the Bitcoin bridge, short-term gains go that way. But in the long run, I believe investors will realize that Ethereum has the faster, more stable bridge. As such, we maintain our moderately bullish Ethereum price forecast of $1,500 by the end of Q2.