The price of Ethereum has persisted in its sharp downward trajectory against both the US dollar and Bitcoin, as its linear weekly futures transitioned into backwardation.
Ethereum (ETH) plummeted to 0.023 compared to Bitcoin (BTC), marking its lowest point since May 2020 and indicating a 74% decrease from its peak during the pandemic.
In a similar vein, the coin fell to a low of $1,770, its lowest point since October 2023, reflecting a 57% decline from its peak in December of the previous year.
The current crash in Ethereum’s price is attributed to various factors, including ongoing ETF outflows, heightened competition from layer-1 and layer-2 networks, and its diminished status as the most profitable asset in the crypto market.
Analysts have also pointed out another contributing factor by examining the futures market. In a recent analysis, the head of derivatives noted that ETH’s linear weekly futures had entered backwardation for the first time since August of last year. Meanwhile, Bitcoin futures have remained in contango during this same period. The analysis stated:
“Ether’s linear weekly futures have entered backwardation for the first time since last August, indicating a growing bearish sentiment in the market following a significant 20% drop in ETH’s price. In contrast, Bitcoin’s futures remain in contango, suggesting relative strength for BTC amidst overall market uncertainty.”
Linear weekly futures are contracts that settle weekly and pay out simply based on market prices. The shift into backwardation signifies that the futures price has fallen below the spot price, implying that the market anticipates further price declines.
Conversely, contango indicates a scenario where futures prices exceed current levels, signaling expectations of future strength in Bitcoin.
Comparative Analysis of Ethereum and Bitcoin Prices
The weekly chart indicates that the ETH/BTC price has been in a steep decline over the past few years. It currently resides below all moving averages, signaling that bearish forces are dominating. The price is approaching significant support at $0.02350, the lowest point observed on December 20.
The Average Directional Index, a commonly used measure of trend strength, has risen to 38. A reading above 25 suggests that the trend is gaining strength.
Both the Relative Strength Index and the Stochastic Oscillator have reached oversold levels. Consequently, it appears likely that the token will continue to decline as sellers aim for the next target at $0.0173, which was the lowest swing in December 2019.