Is another 30% crash versus Bitcoin coming?

The native currency of Ethereum, Ether (ETH), has fallen to its lowest levels in years when measured against Bitcoin (BTC), leading analysts to forecast potential further drops in the weeks ahead.

Warning of a falling knife exacerbates sell-off fears

On March 13, the ETH/BTC ratio—a measure of Ether’s performance relative to Bitcoin—declined by more than 1.50% to hit $0.022, marking its lowest point since May 2020.

This decline is part of a prolonged downtrend for ETH, which began after it reached an all-time high of $0.156 in June 2017. Since that peak, it has decreased by over 85%, highlighting Ether’s increasing weakness compared to Bitcoin.

Additionally, the two-week ETH/BTC chart shows that the relative strength index (RSI), a momentum gauge used to determine overbought or oversold conditions, has decreased to a historic low of 23.32.

Generally, an RSI dropping below 30 indicates oversold conditions, which may lead to a price recovery.

However, in Ethereum’s situation, the RSI has continued its downward trend even two months post-oversold status, indicating that ETH’s decline is still accelerating rather than finding support.

Crypto analyst Alessandro Ottaviani characterized the current market dynamics as a “falling knife” scenario—a term used to signify an asset undergoing a steep and rapid decline, often deterring buyers from entering prematurely.

In this context, trying to buy the asset at what seems to be a low point could lead to additional losses if the downward trend continues.

For Ethereum to suggest a possible turnaround, traders will be monitoring for stabilization in the RSI and a reclaiming of key resistance levels. This ideally would begin with a bounce from the 0.022 BTC mark, which previously limited ETH/BTC’s downward movements in December 2020, resulting in a 300% surge.

If a rebound occurs, the ETH/BTC pair could rise towards its 0.382 Fibonacci retracement line at about 0.038 BTC, coinciding with the 50-week exponential moving average (50-week EMA; highlighted in red).

Until that happens, technical indicators suggest that ETH/BTC might remain trapped in its falling knife pattern, with possible downside targets at historical support levels within the 0.020-0.016 BTC range.

The lower boundary of this range is roughly 30% under current price levels.

Fundamentals strengthen a bearish outlook for ETH/BTC

The likelihood of Ether continuing to decline against Bitcoin is influenced by factors extending beyond technical metrics.

For instance, Ethereum is currently facing formidable competition from alternative layer-1 blockchains, notably Solana (SOL).

Related: ‘The most detrimental event for Ethereum’ — Bitcoin up 160% post-Merge

Reports indicate that Solana’s decentralized exchange volume has surpassed that of Ethereum, even amid a significant drop in memecoin trading activity. During this time, Solana’s trading volume has consistently increased, corresponding with a downturn in Ethereum’s volumes.

Moreover, the introduction of spot Bitcoin ETFs has fundamentally transformed the traditional cryptocurrency market cycle that once favored Ethereum and other altcoins.

Historically, after Bitcoin experienced gains following its halving, capital would migrate into altcoins, triggering an “altseason” during which ETH and other digital assets would outperform BTC. However, the influx of $129 billion into Bitcoin ETFs in 2024 has disrupted this typical cycle, draining liquidity from the broader altcoin market, including Ethereum.

Additionally, specific selling pressure affecting Ethereum plays a role.

A recent hack linked to Bybit reportedly resulted in a significant liquidation of ETH, some of which may have been laundered through decentralized platforms like Thorchain. The repercussions of this sell-off might still be affecting the market, putting downward pressure on ETH’s relative value.

This article does not offer investment advice or recommendations. All investing and trading involves risks, and readers should perform their own research prior to making any decisions.