Blocksmith Says: Renewed Run-Up, But ETH to Underperform BTC

23 August 2022

A few weeks ago we were considering the spread between Ethereum and Bitcoin (XETXBT) and noted that it looked to be running into a mature phase and was likely to top out. It had more power than expected and pressed on higher, but yesterday cracked at a key support-resistance level going back to May 2021. Not only did it crack but there was a real gap down.

In other words, the session high at the close was below the previous session’s low creating a price vacuum. 

Since the start of the data in February 2018, there have only been 29 such real down gaps, so they are fairly uncommon. In terms of long-term average performance out of them, there isn’t much significance (under minus 1% returns over 5 and 10 days). However, since last May in the chart, we can see that XETXBT has a particular personality at tops: it tends to spike and collapse. The average downswing after a spike and drop is minus 28%.

The expectation for both series is a renewed run-up quite soon and it’s not unreasonable to assume therefore that Ethereum will underperform Bitcoin.

Christopher Grafton
Christopher Grafton

Chris has been working in the markets for over 15 years variously as a broker, analyst and researcher. He is the author of a well-known book on Hurst cycles analysis, and runs his own market analysis software platform on Bloomberg. He’s also a keen student of both the cello and Brazilian Jiujitsu.

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