While the bitcoin price plummeted to US$ 42,000, the price of ether (ETH) had a huge appreciation quoted in BTC.
Driven by the growth of the Ethereum network in 2021, the price of the ETH/BTC pair rose 13% while the bitcoin price melted down in the market. According to CoinDesk, there are three reasons behind this rise of ETH against BTC; check it out:
Bitcoin exposition on the Market
Bitcoin investments have grown significantly in the last two years, and the arrival of institutional investors in the crypto market has increased the correlation with the traditional financial market.
Recently, the bitcoin price reflected the devaluation of stock markets worldwide, which plummeted due to the possibility of default by the Evergrande company.
The possibility of future monetary tightening also contributed to increased volatility.
However, the price of ETH has not suffered the same influence, as it has shown detachment from bitcoin’s price behavior.
While the price of bitcoin has plummeted by as much as two digits in the past week, the price of ether in the ETH/BTC pair has seen a drop of only 2.3 percent in the same period. As a result, there is a growing view that ethereum could become an alternative store of value to bitcoin.
Ethereum network updates
The Ethereum network represents one of the most important ecosystems in the crypto market, hosting significant Decentralized Finance (DeFi) and non-fungible token (NFT) projects.
In 2021, the Ethereum network introduced significant updates such as EIP-1559 and ETH 2.0, which seek to reduce the issue of scalability and high fees charged on transactions.
The changes resulted in strengthening the Ethereum network in the market, reflecting on the growth of ETH price against bitcoin.
Bitcoin trading pairs are dwindling
The growth of the Ethereum network was also driven by the use of stablecoins in crypto market trading. Before 2020, bitcoin was the most widely used in altcoin transactions.
This dynamic has changed with the growth of stablecoins that are increasingly used for trading other cryptoassets, thus decreasing the demand for bitcoin.