Let's talk all about Ethereum, and specifically, I want to bring up the question: Can Ethereum actually outperform Bitcoin from now until the next bull market cycle?
More recently, there's been a lot of FUD (Fear, Uncertainty, Doubt) surrounding Ethereum for a couple of reasons. Number one, Ethereum's price has been consistently underperforming Bitcoin's price for the past year. Also, just yesterday, the Ethereum Foundation actually sold a small bag of their Ethereum
holdings, which has caused a bit of panic in the markets.
However, I'm going to make the argument that now is pretty much the best time ever to get into
Ethereum if you are bullish for the entire crypto space. I believe this because I anticipate Bitcoin to have another crypto cycle after the next Bitcoin halving, and with the Bitcoin ETF coming next year. So, let's dive into this with a bunch of data, price charts, and fundamental analysis on Ethereum's potential and why its position in the market cannot be shaken anymore.
I want to bring you guys up to speed first of all to give you a clearer picture of what's happening in the market today and why I'm so bullish on Ethereum.
Ethereum Market Cap
So, you guys know my stance on Ethereum. I really think Ethereum is no longer just another altcoin. Rather, it has become a common goods asset, just like Bitcoin.
If you look at the market cap dominance of the entire crypto sector, Bitcoin currently has around 47% dominance. Ethereum has been as high as 21% of the entire
crypto market but has dropped to about 17%. However, in the last two cycles, Ethereum has really solidified itself as the number two largest crypto that really cannot be overtaken. We see this in the market caps as well.
Bitcoin's market cap is at $530 billion, while Ethereum's is already at $190 billion. More often than not, when you look at these numbers, people are saying, "Bitcoin is the king of all coins and it cannot be overtaken," but really, how much bigger is it? Well, at the bull market peaks, Ethereum was as large as 40% of Bitcoin. So, by market cap, Ethereum is up there just with Bitcoin already.
Ethereum Dominance
Guys, let's talk about Ethereum's dominance. Usually, we look at a metric called Bitcoin dominance, which is the market cap of Bitcoin divided by the overall market cap of the crypto industry. It shows that Bitcoin dominance has been rising in this bear market, signaling that money is flowing from altcoins back into Bitcoin. Essentially, it means that altcoins are losing their market share against Bitcoin, indicating that altcoins are underperforming Bitcoin.
But is this happening with Ethereum as well? Let's take a look. Apart from Bitcoin dominance (BTC.D), we also have Ethereum dominance (ETH.D), and you'll see that Ethereum dominance has held right around the same level for the past two and a half years since May 2021. At the bull market peak, it had one of those significant drops, possibly due to the FTX crash or the Luna crash, but it quickly rebounded. From the very top, Ethereum dominance on the overall crypto market dropped about 12%, from 20% to about 18% today.
Now, if you compare this with the altcoin market, you'll see that altcoins have dropped about 33% from the top in terms of market dominance. Clearly, most other altcoins are underperforming Ethereum, and a lot of the Bitcoin dominance gain is coming from other altcoins, not so much from Ethereum, as it is still holding up around the bull market peak levels.
I also want to
point out that this pattern happens in every crypto cycle. The older altcoins get washed out because they tend to lose value a bit faster than Bitcoin. For Ethereum's sake, it's slightly smaller than Bitcoin, so it does go down a bit more than Bitcoin, which is why we're seeing this short-term market dominance drop on Ethereum.
However, overall, we see Ethereum's market resilience and dominance since the last bear market in 2019. Ethereum was only at 7% market dominance before, and now in this bear market, it really hasn't had that kind of correction. In the last bull market to bear market, Ethereum dominance peaked at 22% and dropped all the way down to 7%. This time around, it peaked at 22% and only dropped to 18%. The resilience of Ethereum's market dominance is evident, and it's unlikely to be replaced in one of these larger-scale sell-offs against the overall market.
Ethereum Foundation Selling
Up to this very short-term news that we saw recently. The Ethereum Foundation sold a portion of their Ethereum holdings, which caused a bit of panic. They sold a total of 1,700 Ether, which is worth $2.7 million. Now, this is not a significant sale. $2.7 million is relatively small for the Ethereum Foundation, considering the entire Ethereum market cap is $189 billion. So, $2.7 million on top of that is negligible.
To give you more perspective, here are historical instances of the Ethereum Foundation selling parts of their Ether holdings in the past three years. Most of these sales were much larger than yesterday's sale, which was only 1,700 Ether. The previous sales were in the tens of thousands or even hundreds of thousands of Ether. So, it's unclear why they even needed to sell such a small amount this time.
Additionally, you'll notice that the Ethereum Foundation tends to sell not only in bear markets but also sometimes on the way up and on the way down. So, this doesn't necessarily signal a market top. There have been sales before when the market continued to rise. Therefore,
I think this is more about the Ethereum Foundation needing to sell for operational purposes, such as paying employees, researchers, and development.
ETH/BTC Chart
Now, let's discuss the Ethereum vs. Bitcoin chart. Many people have recently pointed out that the Ethereum/Bitcoin chart is losing support. Benjamin Cowen, for instance, has been discussing this. Full disclosure, I appreciate Ben's videos, and he did call for this downward move before it happened, which was a correct call.
He identified a rounding top pattern when the Ethereum/Bitcoin ratio was at 0.067, and now it's back down to around 0.056. However, he's currently calling for it to drop to a much lower level, around 0.035, which is about another 50% drop against Bitcoin.
I think this is quite unlikely, and here are a couple of reasons why:
Firstly, consider the cyclical return of Ethereum's price and its performance relative to Bitcoin. According to the Market Cycle Evaluation Score (MCES), we can see a rainbow chart indicating Ethereum's historical cycles.
Ethereum Follows Bitcoin Cycles
So, you might have seen the Stock-to-Flow model before, which is essentially a chart that takes into account the Bitcoin halving events. In this chart, each time a Bitcoin halving event occurs, the color code resets. These color codes represent how many months are left until the next Bitcoin halving event. Once the halving occurs, the chart turns orange and then transitions through yellow, green, and so on, with blue and purple indicating bear market phases. The cycle starts again when it turns orange, signaling the next cycle.
The idea here is to accumulate during the blue and purple color-coded cycle periods. For Bitcoin, this approach has been effective. For example, you can see that the blue and purple periods in 2015-2016 and 2019-2020 were great buying opportunities.
This strategy also holds true for Ethereum. If you look at the Ethereum price chart while considering
Bitcoin halving events, buying Ethereum during the blue-colored ranges, such as its initial launch and the 2019 bear market, would have been a wise move. It allowed you to buy Ethereum at around $120 before its significant rally. Now, Ethereum is once again in a buying range.
Considering the timing of the market, it suggests that Ethereum is unlikely to drop significantly lower. When comparing it to Bitcoin in the Ethereum vs. Bitcoin chart, this perspective becomes more evident.
Best time to buy ETH
In 2015, when the rainbow chart was in the blue to purple levels, particularly when it transitioned from blue to purple, it presented a great buying opportunity. Accumulating Ethereum at these levels resulted in a 4x return of Ethereum against Bitcoin. Ethereum experienced its first significant rally against Bitcoin during this time.
In the 2019 bear market, buying Ethereum
when the color codes shifted from blue to purple led to a 4.5x return of Ethereum against Bitcoin. Ethereum outperformed Bitcoin during this period. Now, we're seeing similar conditions, with the color codes aligning with the timing of Bitcoin market cycles.
Based on historical data, if you accumulate Ethereum now, it's likely to increase in price not only in USD terms over the next cycle but also perform well against Bitcoin.
This analysis suggests that now is not the time to be bearish on Ethereum. While Bitcoin has garnered much of the attention, Ethereum is poised to catch up and potentially outperform Bitcoin.
Let's continue discussing fundamental catalysts. The first is the Bitcoin spot ETF, which has been making headlines and could significantly impact Ethereum. This anticipation for the Bitcoin spot ETF, expected next year, is contributing to the bullish sentiment.
Ethereum Price Prediction
the price of Bitcoin and Ethereum in the next market cycle. The writer anticipates Bitcoin reaching around $200,000 per coin by the cycle's peak, based on diminishing returns. This would give Bitcoin a market cap of approximately $4 trillion.
For Ethereum, the estimation is a price of around $16,000 per coin, based on the assumption that Ethereum maintains its market dominance at approximately 20% of the entire cryptocurrency market. This would give Ethereum a market cap of $2 trillion.
The writer believes that this price target for Ethereum is
reasonable, considering the historical performance between the 2018 peak and the 2021 peak. They also suggest that, if these estimates hold true, Ethereum is likely to outperform Bitcoin by about 1.5 times in terms of price increase.
The passage goes on to emphasize that Ethereum's fundamentals align with those of Bitcoin, and as long as the cryptocurrency market cycle hype continues, Ethereum is expected to perform well and catch the wave of the market's growth.