All Eyes On The Ratio

ETH/BTC Ratio looking primed and ready for a breakout. Is the flippening imminent?
Nov 29, 20213 min read

Dear Bankless Nation,

I hope our U.S. readers had a relaxing Thanksgiving break!

We’re entering the time of the year where people try and juggle a 24/7/365 industry while also trying to take time off for the holidays. This usually just ends up in more Twittering and looking at the charts.

At least…that’s how I intend to spend the remainder of this year 😅

There’s one chart that I’ve been checking more and more lately, and that is the ETH/BTC chart which tracks the value of ETH as denominated in BTC.

Here’s the full log chart from 2016 with 1-week candles:

Here it is zoomed in to 2020 and 1-day candles:

I’m not a trader, but even I can tell when a chart just looks good. Other non-trader types see it too. This is objectively a bullish chart ¯\_(ツ)_/¯

Crypto traders see it too:

During the depths of the 2018/19 bear market, the popular crypto narrative was that everything would go down vs BTC over time.


Ethereum would never recover in BTC terms.

But right now ETH is looking poised to make new highs vs. BTC—something we haven’t seen since the ICO mania of 2017.

ETH has spent very little time higher vs BTC than it is right now.

The ETH/BTC ratio is in price discovery again.

It’s one thing to go into price discovery vs USD…that’s easy mode. But when you enter into price discovery vs. BTC, that’s something entirely different.

One theme that we’ve seen throughout Ethereum’s history is that the ETH/BTC chart goes up in bull markets, and down during bear markets. Lately, there’s been a lot of bearish/spooked sentiment with regards to the macro markets.

The Omicron variant shook a lot of people out of their positions, and many people began taking fear-based profits.

But when I see the ETH/BTC ratio climbing, I see a new wave of energy for the bull market. If the ratio convincingly breaks out above 0.08, I think we are in for another wild period in crypto.

The ETH/BTC ratio goes up in a bull market.

Why is this happening?

The Bitcoin maximalist thesis is that the immaculate nature of BTC (the hard cap + genesis story) will drive perpetual demand for BTC, and why all things are down vs. BTC over the long term. It’s an interesting story, but I’ve never been convinced that a story can drive fundamentals.

There are a few huge things at play right now that are driving the ETH price, that are verifiable fundamentals:

  1. EIP1559 as burned over 1M ETH. We’re almost at 1% of the total ETH supply burnt and EIP1559 only launched in August. Taking it a step further, the network is projected to burn $20B in ETH in the next year.
  2. The Merge is around ~6 months away or less. Right now, 50% of issued ETH becomes burnt, but after the merge, about 200-300% of issued ETH will be burnt. (I just finished a Layer Zero with Tim Beiko and asked him for details on this. Drops tomorrow.)
  3. NFTs, one of the major forces behind the ETH burn, are also doing fantastic marketing on behalf of Ethereum, and more and more people are learning about the connection between NFTs and ETH.

There are other forces in play within the Ethereum economy, but these are the big three now. I also think Ethereum’s scalability story is drastically underrated and will become much more obvious sometime next year.

The flippening has been a constant subject in the back of Ethereans heads since even before the first block of Ethereum was even mined.

We’ve long argued that it’s inevitable.

But if the ETH/BTC ratio goes higher, you can expect this conversation to resurface beyond our newsletter and crypto twitter and into public discourse.

Wouldn’t that be something?

In the meanwhile, I’ll have RatioGang.com open on one of my browsers ;)

See you at the flippening. 🐬

- David

Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.

Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here.

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