For the first time in 2023, Ethereum price outperformed Bitcoin on several metrics, signaling a fundamental shift in market structure. The second cryptocurrency by market cap follows the general sentiment in the sector and sets new annual highs.
At the time of writing, Ethereum price is trading at $2,300 with a gain of 4% in the last 24 hours. This past week, the cryptocurrency posted a 10% gain, with most of the altcoin sector still lagging the current price action.
Ethereum Price Signals Strength for the Altcoin Sector?
a report from BlockScholes, posted by the options platform Deribit, indicates a spike in Ethereum price volatility back to a level above that of Bitcoin. ETH’s shift in market structure signals that traders and institutions are preparing for early 2024.
The report claims that the possible approval of a spot in the US ETH Exchange Traded Fund (ETF) is behind the current price action. This new dynamic suggests that the bullish sentiment over this event has shifted from Bitcoin to Ethereum.
As shown in the chart below, Ethereum is posting higher returns than Bitcoin for the first time since July 2023. The surge in returns allowed ETH to break an ongoing downtrend, according to BlockSholes, but overall the cryptocurrency’s performance remains within its annual range.
In other words, Ethereum price is doing better than other periods in 2023, but still lacks bullish momentum regarding Bitcoin. However, the report noted:
This reversal is not yet strong enough to provide confidence in a return to the market structure we previously expected, but it does indicate that the effects of speculative bets around the adoption of a spot ETF are not limited to BTC. This is reflected by the implied volatility for both assets over the maturity structure, which predict similar volatility levels for both assets.
What Favors an Altcoin Rally?
Additionally, the report noted a decline in the US dollar as measured by the DXY Index. Risky investments can flourish when currency trends are down, possibly signaling accommodative monetary policy from the Federal Reserve (Fed).
If Ethereum continues to gain bullish momentum from its current levels, the entire altcoin sector could see further gains. The report indicates that most entities and traders are pricing in a “risk event” by the end of January 2024.
Bitcoin and Ethereum could therefore see a bigger rally by then. Whichever coin prevails can reveal more information about the subsequent trend; if Ethereum performed better, altcoins are more likely to follow suit.
Cover image from Unsplash, chart from Tradingview
