ETH/BTC Analysis:

  • Bitcoin declines 30% from recent high compared to Ethereum at 18.5% measured at current levels
  • ETH/BTC technical set up looking to take advantage of Ethers relative strength versus Bitcoin

Crypto Assets and Inflation Heading into 2022

Crypto markets in general have seen some phenomenal price appreciation due to its large appeal as a hedge against inflation. While inflation persists, measure to combat it are being talked up more and more and major central banks, such as the Fed, have started to recognize the longer term effects of persistent inflation. Rates markets have stepped up their expectations of interest rate hikes into 2022 although, such expectations have proven to change – or self-correct – in response to central bank policy statements or evolving news surrounding the Omicron variant.

With much of the focus on controlling inflation, major crypto assets like Bitcoin and Ethereum have pulled back from recent highs but Ethereum looks to have weathered the storm better than its counter-part, Bitcoin. Ethereum has dropped 18.5% from the recent high compared to more than 30% decline in Bitcoin

Ethereum Holding up During Latest Decline

While exhibiting a short term directional move lower, Ether remains within the longer term uptrend as the ascending trendline – acting as support – remains intact. As long as this remains to be the case Ether bulls may view a bounce off support as an opportunity to re-enter the longer term uptrend, either via ETH itself or via the ETH/BTC pairing.

With this being said, the potential for an extended lower move cannot be ruled out. The MACD has just moved below the zero line so pre-empting the move should be avoided.

Ethereum (ETC) Daily Chart

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Chart prepared by Richard Snow, IG

Bitcoin Drops Nearly One-Third from Recent High

When compared to Ether, Bitcoin has seen a more drastic decline since the recent high and subsequently broke below the ascending trendline. The largest cryptocurrency by market cap trades just below the psychological level of 50,000 which remains the nearest level is resistance. Subsequent failed attempts at the 50,000 may be symptomatic of further future declines.

Bitcoin Daily Chart

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Chart prepared by Richard Snow, IG

ETH/BTC Technical Setup

A stronger Ether relative to Bitcoin establishes the potential for a bullish move in ETH/BTC as the pair tests the prior high (March 2021) at 0.08160. A bounce off this level could see the pair move back towards the all-time high which printed just a few days ago.

Ethereum/Bitcoin (ETH/BTC) Daily Chart

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Chart prepared by Richard Snow, IG

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX





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