Regardless of the direction BTC takes in the short term, certain technical factors suggest that Ethereum could regain the upper hand in the coming weeks.
While the price of Bitcoin has been subject to fundamental, global macro, and geopolitical uncertainty and has been trying to stabilize since the beginning of the year, technical analysis suggests that ETH could soon enter a phase of outperformance relative to BTC.
An examination of the medium/long-term charts for the ETH/BTC ratio highlights a pattern already observed in the past (in 2019/2020) and associated with future phases of outperformance by ETH.
I will return to two key points below:
- The value of technically analyzing a ratio such as ETH/BTC to identify phases of outperformance and underperformance;
- The potentially bullish technical signals currently visible on the medium-term chart of the ETH/BTC ratio.
Why analyze the ETH/BTC ratio?
A ratio such as ETH/BTC allows us to evaluate the relative performance of two assets, without worrying about the overall market trend. If the ratio rises, it is the numerator that is outperforming, and vice versa.
When the ratio rises, it means that Ethereum is outperforming Bitcoin.
Conversely, a decline reflects ETH underperforming relative to BTC. In short, if there are bullish signals on ETH/BTC, this increases the likelihood that the ETH token will outperform BTC, especially if these signals are visible on medium/long-term charts.
Technical reading of the weekly chart, bullish signals in the making
In weekly data, the ETH/BTC ratio has been trading within the Ichimoku cloud for several months, after reacting to a particularly important long-term support zone. This zone corresponds to a level that has been historically defended several times since 2019, which reinforces its technical relevance. We are clearly at an extreme cycle support level.
Currently, prices are approaching the upper limit of the weekly cloud. A clear and confirmed break above the Kumo would signal a change in trend in favor of Ethereum. In the past, this type of configuration has often preceded prolonged periods of ETH outperforming BTC.
This is the bullish reversal chart pattern from 2020 that seems to be repeating itself. It took weeks to develop and materialize into ETH’s outperformance, so we must remain patient and cautious.
But clearly, from a medium/long-term perspective, ETH seems to be in a position to outperform BTC, regardless of the direction the latter takes in the coming months.
