A new report from CME Group, one of the world's largest derivatives markets, reveals that the price of Ethereum is more sensitive to movements in technology stocks and the US dollar than the price of Bitcoin.
The report, titled “Three Factors Driving the Ether-Bitcoin Price Link”, examines the factors that affect the relative value of Ethereum (ETH) and Bitcoin (BTC) in the crypto markets.
“Ethereum Outperforms Bitcoin As U.S. Tech Stocks Rise”
According to the report, the exchange rate between the two cryptocurrencies, ETHBTC, shows a moderate but persistent positive correlation with the Nasdaq 100 and S&P 500 Technology Select Sector futures, which track the performance of tech-heavy companies.
This means that when tech stocks rise, ETH tends to appreciate more than BTC.
On the other hand, ETHBTC shows a negative correlation with the Bloomberg Dollar Index (BBDXY), which measures the strength of the US dollar against 10 major currencies. This means that when the dollar strengthens, ETH tends to depreciate more than BTC.
The report also explores how the supply dynamics of both cryptocurrencies affect their prices.
“Proof of Stake Didn't Affect ETH/BTC Rate Much”
ETH has transitioned to a proof-of-stake (PoS) model that rewards validators who stake their coins to secure its network. Under this model, the supply of ETH began to shrink as some coins were burned or locked in staking contracts, but this had no noticeable impact on ETH prices compared to BTC.
“BTC Halving and Geopolitical Crises Could Benefit Ethereum More Than BTC”
The report suggests that BTC supply is more influential on the ETHBTC rate. BTC supply is completely inelastic, meaning it does not change with demand or price fluctuations. It follows a predetermined path determined by its algorithm, which halves its supply growth every four years in an event known as halving.
The report states that BTC halvings have historically coincided with major price rallies followed by major bear markets. The next halving is expected to occur in April 2024.
According to the report, if BTC continues to rise before the next halving, as in previous cycles, this could also increase ETH prices relatively. Also, if external factors such as geopolitical tensions increase the demand for BTC as a store of value or as a hedge against inflation, this could also benefit ETH more than BTC.
*Not investment advice.
