In the fall of 2022, the Bitcoin to Ethereum ratio stood at one bitcoin to twelve-point five ether. The ratio measures the strength of Bitcoin to Ethereum by calculating how many ether are needed to buy one bitcoin. At the time, Bitcoin was trading at $16,500 and Ethereum was at $1,320, giving us the one to twelve point five ratio. In the eighteen months that followed, bitcoin went on an amazing run that increased the ratio to a high — on April 13th, 2024 — of one bitcoin to over twenty-one ether. Over the last two weeks, there has been a noticeable change in tone as that ratio collapsed to the current level of one bitcoin to nineteen ether. 

The story appears to be straightforward. Throughout 2023 bitcoin had a massive tailwind based on the anticipation of the first domestic spot Bitcoin Exchange-Traded Fund (ETF). The run-up to the launch brought in some of the biggest money managers in the world, scrambling to participate in the space. Even as the headline of the new ETF came and went, bitcoin had the good fortune of a second headline that appeared to support prices. The Bitcoin Halving occurred on April 19th, which cut the monetary reward for mining bitcoin in half, limiting the incentive to bring future supply to the market. 

Now that those major stories have been fully digested, is it possible that it’s Ethereum's turn to take a leading role in the crypto space?  Between April 13th and April 28th, Ethereum gained over nine percent in value, while during the same period bitcoin lost almost two percent. This price action over a fifteen-day span could easily be market noise based on positioning, but it is certainly an oddity when the two assets move in the opposite direction and it's worth watching in light of the shifts in the fundamental stories. 

Ethereum is now poised to have a spot ETF, as major players like Van Eck and Franklin Templeton have applied to the Securities and Exchange Commission (SEC) for approval to launch an Ethereum ETF. Though most analysts have noted that the SEC seems much less motivated to move at the frantic pace they adopted during the Bitcoin approval process. SEC chairman Gary Gensler’s stance on Ethereum could be part of the problem. Up to this point, the chairman has refused to clarify whether or not he believes Ethereum to be a traditional security, which could affect the timeline for an ETF. Additionally, an Ethereum ETF has recently been approved to trade in Hong Kong by its financial regulator, the Securities and Futures Commission (SFC). Most believe that one by one, the obstacles to domestic approval will fall away, leading to eventual approval. 

There have been some fundamental shifts in the macroeconomic landscape that appear to be favoring dollar hedge assets, including cryptocurrencies. The U.S. government continues to take on debt at an unprecedented pace, with the total rising by one trillion dollars every one hundred days. In the last week alone, the Federal government announced a ninety-five-billion-dollar foreign aid package as well as seven-billion and six-billion-dollar grants for solar panels and semiconductors, respectively. Perhaps the plight of the Japanese yen gives a glimpse of the potential crisis that could occur from too much debt and accommodation. The yen lost over 33% of its value against the dollar since just before the pandemic, causing a recent Bank of Japan (BOJ) intervention to support the currency. Many feel that the Federal Reserve may be on a similar path. 

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Financial Advice Disclaimer: Nothing in this article constitutes professional or financial advice, performance data or any recommendation that any specific cryptocurrency, portfolio, index, investment product, transaction or investment strategy is suitable for any specific person. You assume the sole responsibility of evaluating the merits and risks associated with all financial decisions and should seek the advice of a registered financial advisor when in doubt.