The Ethereum network is expecting to reach a new milestone in 2018. Earlier this year, analysts projected the price of ether would surpass one bitcoin by 2020. It seems that the timeline for their prediction may be slipping as Ether continues to soar independent from BTC’s price decline
Ether’s growth as an independent asset has fueled the narrative that ETH-BTC will soon see a flippening.
For quite some time, there has been talk of Ether (ETH) rapidly transitioning into an independent asset. However, in recent months, this view has gained growing public acceptance, as seen by the fact that, since Oct. 1, ETH has shown significant northward movement versus Bitcoin (BTC).
To put things in perspective, the one-month realized correlation between the BTC/ETH pair plummeted as low as 60% at the start of November, the lowest level in the currency’s decade-long history. Furthermore, whereas Bitcoin has gained 105 percent since the beginning of the year, Ether has gained 505 percent, beating the flagship cryptocurrency by almost five times.
The fact that the ETH/BTC pair has continued to trend north over the previous couple of months, despite a big market drop since the beginning of December, is arguably the strongest indication of Ether’s ascendency. In this sense, even as the price of BTC went below $50K, the ETH/BTC pair continued to gain value, rapidly climbing by roughly 13% and reaching a three-year high.
The ‘flipping’ storyline
According to a spokesperson for Binance’s research department, the above-mentioned activity — in which ETH has been able to muster a lot of independent market support against Bitcoin — has been quite unusual, given that the ETH/BTC pair only rallies during bull runs, adding: “This is not to say that ETH has already decoupled from BTC, but it provides a clear-cut glimpse that not all alts are correlated to BTC movemen The representative went on to say:
“It’s critical to recognize that although ETH is no longer regarded an alt, it is still a token with its own set of features. The burgeoning Metaverse, GameFi, and NFT storylines, which are all essentially based on the ETH network, are the major drivers for the current surge.”
Despite the fact that ETH is still far from being entirely decoupled, the representative said that such a concept is no longer a pipedream, as the general narrative is starting to alter as a result of Ethereum’s new emergent use cases and acceptance.
Not only that, but the analyst believes a similar scenario could play out for a number of other popular altcoins: “Just like in traditional equities, there will be no distinction between ‘BTC and alts,’ but rather prices of all tokens will be driven independently by both systematic and unsystematic risks.”
Igneus Terrenus, the head of communications at cryptocurrency exchange Bybit, told Cointelegraph that, at the end of the day, a digital asset’s value is determined by its supporters and investors, and that, after more than six years of development and a plethora of smart contract applications built on top of Ethereum — including those related to fledgling spaces like DeFi and NFTs — the premium altcoin has developed an identity and ecosystem of communities that exist independently. “Overlaps will persist, but there is now enough difference to support a price movement divergence,” Terrenus said, adding:
“As the demography of the BTC and ETH camps continue to separate, we may anticipate their price actions to become further disentangled.”
In the market, ETH is in a unique position.
Netta Korin, co-founder of Orbs, a public blockchain infrastructure, told Cointelegraph that ETH’s straight-up northward rise since Oct. 1 continues to provide fire to the idea that Ether will eventually flip Bitcoin. Despite the fact that the great majority of other cryptocurrencies still have a high degree of connection with BTC, she believes Ether has shown to be “oil for DApps.”
Korin went on to say that Ethereum has long surpassed Bitcoin as the most widely used blockchain, and that it has outperformed BTC when it comes to recovering from market downturns. She went on to say that the impending Eth2 upgrade would “improve the demand viewpoint,” and that it will “increase the demand perspective.”
“Ethereum’s new supply and demand mechanisms, as well as its position as the main financial infrastructure and a critical backbone for some of the most popular projects, such as MakerDAO and Uniswap, make ETH decoupling a possibility.”
Korin also mentioned Ethereum as a significant participant in DeFi and a core platform for the NFT area, which aims to develop financial apps for lending and trading on the blockchain — with over 3,600 DApps now operating on the Ethereum ecosystem. Not only that, but Ether’s ties to DeFi and the market for NFTs, two sectors she believes will increase tremendously in 2021, may make it an inflation hedge. “By market capitalization, Ethereum is on track to replace Bitcoin as the most valuable cryptocurrency,” she said.
Is it possible that ETH’s prolonged independence will aid BTC’s growth?
Will the impending separation of ETH have an influence on a possible BTC bullish move if the ETH/BTC pair begins to grow? On the matter, a member of Binance’s research team told Cointelegraph that even if the price disparity between the ETH/BTC pair continues to widen at its present rate, it would be incorrect to conclude that the development would result in a general increase in BTC’s price, noting:
“Regardless of how negative BTC appears on the charts or how other tokens perform, large investors will continue to purchase it.” They do so because BTC is still the market leader and pioneer in the field. This is bolstered by the idea that Bitcoin is a digital store of wealth and inflation hedge.”
However, the Binance analyst did admit that, on the other end of the scale, they still predict a feeding frenzy among both retail and institutional investors as they rush in to expand their ETH exposure.
Major financial organizations across the world have taken note of Ether’s growing market weight, with JPMorgan Chase suggesting in a recent analysis that ETH might be a better investment for investors than BTC, particularly as the digital asset market matures and evolves. According to the company’s research experts, ETH’s fivefold increase in value compared to BTC over the previous year has resulted in a market valuation of roughly half that of Bitcoin.
Another feature of ETH that has many investors excited is the network’s potential to acquire a significant footing in the growing Web 3.0 ecosystem, which is currently gaining traction despite the fact that its real-world implementation is still years away. While no one can predict how this field will develop in the future, there is a reasonable likelihood that ETH will capture a significant portion of the value connected with the decentralized Web 3.0.
As the Eth2 merging approaches, Ethereum has gone into full deflation mode.
Last but not least, the Ethereum network’s London upgrade — which went live in August 2021 — changed the way the currency’s gas charge rates are calculated, essentially burning a percentage of all ETH-based fees and lowering the altcoin’s overall supply pool. In terms of numbers, this has resulted in Ether’s yearly inflation rate dropping from 4% to 3%.
Not only that, but Ether’s ever-changing monetary rules are meant to assist in the asset’s conversion to a deflationary asset, making it appealing to both long-term investors and institutional funds. As a result, it stands to reason that Ether’s status as a stand-alone asset will only grow in popularity.
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The “flippening watch” is a popular cryptocurrency topic, as the ETH-BTC pair has been hovering around $300 for some time. Ether’s growth as an independent asset fuels this narrative.
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