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Bitcoin Price Soars Above $66K Amid Declining US Inflation, ETH/BTC Ratio Hits Three-Year Low

While Bitcoin enjoys a robust climb influenced by favorable macroeconomic indicators, Ethereum faces a challenging terrain marked by regulatory hurdles and intense market competition.

Bitcoin climbs on macroeconomic indicators while Ethereum slides on regs hurdles.
Credit: Foretoken Media 2024

At press time, bitcoin's price has ascended to $66,245.22, marking an impressive 8.3% increase from last week. This surge comes amid $82 billion in transactions over the past day, as reported by Coinglass.

Bitcoin Price Soars as U.S. Inflation Drops

The uplift in bitcoin's price aligns closely with the latest US inflation trends, where a decrease has been noted for the first time in six months. This pivotal financial update was released on Wednesday by the Bureau of Labor Statistics, showing a drop in consumer prices, which subsequently buoyed risk-on investors who are active in both the cryptocurrency and stock markets.

Implications of Inflation Trends on Federal Rate Decisions

The Consumer Price Index (CPI), a critical indicator for the Federal Reserve's monetary policy, suggests a potential for reduced federal interest rates. Presently, 54% of market participants anticipate a likely rate cut by the Fed in September 2024, based on insights from the CME FedWatch Tool. This tool analyzes federal funds futures to gauge future rate adjustments, hinting at a possible ease in monetary policy if the inflationary pressures continue to dissipate.

In the cryptocurrency sector, the ratio between Ethereum (ETH) and Bitcoin (BTC) has experienced a significant downturn, reaching 0.04563 on Binance – the lowest since April 2021. This year alone, the ETH/BTC ratio has plummeted nearly 16%, signaling a growing market preference for bitcoin over Ethereum, according to data from TradingView.

Ether Falls Out of Favor Amid Regulatory Uncertainties

The decline in the ETH/BTC ratio is mirrored by diminishing demand for Ether-based exchange-traded products (ETPs). Data from Bloomberg, as cited by ETC Group, reveals that global Ether ETPs saw net outflows of approximately $63.5 million last week.

In contrast, bitcoin ETPs attracted $92.5 million in the same period. Factors such as competitive Layer 1 blockchains and the uncertain future of spot ETH ETF approvals in the US are contributing to Ether’s waning investor interest.

Competitive Dynamics and SEC Decisions Affect Ether's Position

The cryptocurrency landscape is witnessing shifting dynamics with Ethereum facing competition from other Layer 1 networks like Solana, which has significantly increased its share in decentralized exchange volumes.

Moreover, the uncertainty surrounding the approval of spot ETFs for Ether by the US Securities and Exchange Commission (SEC) adds to the challenges for Ethereum. Notably, the SEC has approved several spot Bitcoin ETFs, enhancing Bitcoin’s appeal as a macro asset and a reliable store of value.

As the SEC deliberates on upcoming decisions for Ether ETFs, with deadlines in May and June for applications from firms like VanEck and BlackRock, the outcome will critically shape Ethereum's financial standing.

The current market sentiment and regulatory environment suggest a cautious outlook for Ether, especially as it battles perceptions and competes against an expanding array of decentralized protocols and Layer 2 solutions.


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