ETH/BTC Correlation; ETH Tests $400

ETH continues to fall to relative lows, sitting now at $405 after briefly breaking below $400 overnight.

I think ETH remains around $400 today before a rebound starts tomorrow/this weekend.  However, a lot of that depends on the price of Bitcoin – a fact I haven’t properly expressed or explored.

Bitcoin and Ethereum Move Together?

Intra-day movements are often extremely similar between BTC and ETH, as you can see below:

ETH Mar 27-Mar 29
BTC Mar 27-Mar 29

While these charts look identical, if you look at the ETH/BTC ratio, ETH performed worse than BTC, despite following the same pattern –

ETH/BTC Ratio, Mar 27-Mar 29

For ETH holders, watching this ratio fall back into the .05 range has… not been fun.  Since the peak of $1400 on January 13th, BTC has outperformed ETH significantly, with the ratio moving from .09 to .054.

ETH/BTC Ratio since January ATH

So while the price direction is often highly correlated, the ratio has actually been quite volatile.

Zooming out on the ETH/BTC ratio since the beginning of 2017 you can see just how much fluctuation there has been –

Now overlaying this graph with the price of ETH (green line), the big price increases throughout the past year have often coincided with big gains on the ETH/BTC ratio.

The price movements between BTC and ETH are highly correlated the majority of the time, until they diverge greatly. 

I expect that the next ETH run up will take place between late April – June.  I also expect ETH to outperform BTC significantly on the ratio, getting back to .1 at a minimum.

Longer term, over the course of 1-2 years, I see the ratio reaching .2 and beyond.

So, what happens if Bitcoin falls right now?

ETH, in turn, would drop lower as well – however, I think we’re close to reaching a bounce point for the ratio.  If both BTC and ETH continue down, I think we’ll hit a bottom on the ratio of .05, before ETH starts gaining.

I think there’s an imbalance right now between BTC/ETH which will play out positively for ETH over the course of 2018.