Three months ago, we suggested that if you wanted to buy a cryptocurrency, then Ethereum was a much better deal than Bitcoin.
At the time, Bitcoin was trading for about $120,000 while Ethereum was under $2,000.
It has since played one heck of a game of “catch up.” Now, though, Ethereum doesn’t have an edge over Bitcoin.
Ethereum was the cheapest it had been relative to Bitcoin since 2020. So, we figured Ethereum had plenty of room to run…
Today, Bitcoin still trades for about $120,000. Ethereum, on the other hand, is over $4,700.
That’s a 135% gain – in three months!!
Now though, Ethereum is no longer “cheap” relative to Bitcoin. Here’s an updated look at the ratio chart we shared with you back in May…
When this chart is moving higher, Bitcoin is outperforming Ethereum. When the chart is falling, Ethereum is the stronger of the two.
It’s no surprise then that the chart has fallen sharply over the past three months. Ethereum’s “catch-up” performance has pushed the chart back towards its historical average near 25. At this level, Bitcoin and Ethereum are equally valued relative to each other. There’s no edge to buying one over the other.
This doesn’t say anything about the future strength or weakness of the cryptocurrency market. We can’t infer anything bullish or bearish from this chart.
Ratio charts merely tell us when one asset is expensive/cheap relative to another asset.
Back in May, Ethereum was cheap relative to Bitcoin. So, it made sense for cryptocurrency bulls to buy Ethereum.
Today, there’s no edge to buying either asset. They’re both relatively valued.
In the future, though, crypto traders should pay attention to this chart. If it extends too far in one direction or the other, it will present the better investment opportunity.
That could mean the difference between merely breaking even over a three-month period, or making 135%.
Best regards and good trading,
Jeff Clark
Editor, Market Minute
P.S. Did you act on the Ethereum trade back in May? Let us know at [email protected].
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