Report: Will Ethereum replace Bitcoin and become the new market "barometer"?

As of press time, Ethereum is still struggling to maintain its upward trend after Bitcoin pulled back to $50,000.

How did Ethereum initially recover its losses? Why is Ethereum reaching a new all-time high price, especially when other cryptocurrencies, including Bitcoin, have pulled back? The answer may lie in Ethereum’s rise as an independent digital asset that could take over from Bitcoin and drive the cryptocurrency boom again.

Think about it, selling pressure has been a pain point for the cryptocurrency market over the past few days, with various indicators showing bearish signals across the board. However, in the case of Ethereum, this pressure has eased somewhat, and the supply of Ethereum on exchanges also shows this.

According to data from Santiment, Ethereum’s exchange supply recently fell to a one-year low. This means that Ethereum is being moved off exchanges and replaced by long-term holders and other savings, a finding that supports Ethereum’s price outlook and long-term credibility.

Ethereum's daily demand deposits have continued to decline since the second half of 2020, also highlighting that more and more people are now holding on to their Ethereum instead of transferring it to exchanges to sell or dump it.

Here, it is worth noting that the recent price correction has contributed to Ethereum’s price cycle remaining benign, as continued appreciation could actually lead to an increase in risk.

When Bitcoin fell below $50,000, Ethereum fell to $2,150, but its 30-day MVRV (MVRV is a relative indicator, the ratio of circulating market value to realized market value) remained strong in the overvalued range. This means that although Ethereum is trading around $2,500, it is possible to see more gains before the market corrects.

Ethereum’s MVRV is expected to fall before the Bitcoin and Biden-driven dollar devaluation kicks in. Therefore, once the market stabilizes, Ethereum will have more upside.

However, when might that be? This is a question that has no definite answer. At the time of writing, Bitcoin and Ethereum are still in a correction, with Bitcoin trading below $51,000. Over the next few trading sessions, it will be crucial for Ethereum to resume its rally, considering the ongoing consolidation phase.

If Bitcoin continues its dumping behavior, Ethereum’s upside will likely be delayed once again.

If the past 72 hours are any evidence, Ethereum is indeed following in Bitcoin’s footsteps. But will this correlation end soon? In fact, it may have already begun, as Santiment noted that “Ethereum’s price is finally deviating from its correlation with Bitcoin’s price, which is positive news.”

Simon Peters also believes that Ethereum and Bitcoin are gradually “decoupling”. The popular analyst recently pointed out in an interview with AMBCrypto:

“While Ethereum and Bitcoin have been trading in lockstep for much of the past three years as the digital asset market matured, investors will look at the broader universe of assets and assess which ones have the best long-term potential.”

He added, “Bitcoin has attracted the attention of millions of investors, but Ethereum offers an alternative. Since Ethereum’s dollar valuation is much lower than Bitcoin, it attracts investors who want to own the entire ecosystem, which is currently much more expensive to achieve with Bitcoin.”

Despite the recent price drop, strong fundamentals, ecosystem-centric developments, declining correlation with Bitcoin, and Bitcoin’s declining market dominance make it likely that Ethereum will eventually decouple from Bitcoin’s correlation once some stabilization occurs.

While doing so, Ethereum may also capture more market share.

The original text comes from ambcrypto, compiled and edited by Blockchain Knight. The English copyright belongs to the original author. Please contact the translator for Chinese reprint.