As of the current moment, Ethereum (ETH) appears to be displaying signs of weakness in comparison to Bitcoin (BTC), evident from the ETH/BTC price chart showing a significant decline. The previously observed bullish divergence for ETH seems to have lost its momentum as it nears the 0.04 BTC threshold.
If Bitcoin continues its upward trajectory towards the $61k-$62k range after reclaiming the $57k mark, it is highly likely that ETH will experience further downward pressure.
Currently, ETH is lacking a strong support level, making it essential for traders to exercise caution and wait for more favorable market conditions before anticipating any substantial recovery. Although ongoing inflows could potentially aid ETH in stabilizing, it currently remains in a position of inferiority when compared to Bitcoin.
The ETH/BTC Relative Strength Index (RSI) accentuates this divergence, showcasing a scenario where the price is decreasing while the RSI continues to form higher lows – a signal indicating a possible trend reversal.
The diminishing trading volume also hints at a potential drop in ETH’s value below the 0.04 BTC mark. In the event of Bitcoin’s depreciation, this could create an opportunity for ETH to reverse its current trend. However, until there is confirmation of such a reversal, the prevailing bearish trend for ETH is expected to persist.
Significant Sell-Off by Global Institutions
Moreover, major international institutions have started divesting their Ethereum holdings, as reported by Lookonchain on X.
For example, Metalpha recently transferred 6,999 ETH valued at $16.4 million to Binance, contributing to a total deposit of 62,588 ETH valued at $145.1 million over the past six days. Their remaining ETH assets now amount to just 23.5k ETH, equivalent to $55 million. In addition, Metalpha has liquidated its Layer 2 tokens such as Optimism (OP) and reduced its staked ETH (stETH) holdings to 1,907 stETH.
Impact of Ethereum CME Trading Volume
Furthermore, the reduced Futures trading volume on the Chicago Mercantile Exchange (CME) is likely to extend the weakness of ETH against BTC. In August, the trading volume witnessed a decline of 28.7% to $14.8 billion, marking its lowest point since 2023.
Year-to-date, ETH’s price performance remains negative, with its exchange-traded funds (ETFs) displaying unfavorable net cumulative flows. Additionally, the Ethereum Foundation’s decision to offload ETH holdings adds further downward pressure on the cryptocurrency’s value.
Consequently, it is probable that ETH will continue its descent before a potential rebound, potentially materializing in Q4 of 2024.
Sentiment Analysis: Crowd and Institutional Views
Lastly, sentiment analysis from both the crowd and smart money perspectives indicates a prevailing bearish sentiment towards ETH. Retail traders and institutional investors seem to be in agreement regarding the bearish outlook for Ethereum within the current market scenario.
This alignment between individual and large-scale market participants implies that Ethereum’s downtrend is likely to persist until there is a shift in market dynamics or the emergence of a significant catalyst that could trigger a price recovery.
Hence, Ethereum’s vulnerability against Bitcoin is anticipated to continue, particularly until there is an improvement in the broader cryptocurrency market conditions.