ETH-independent growth is driving the BTC “flipping” narrative

More and more data shows that Ethereum is actually keeping its promise to “flip” Bitcoin in the next few months and years.

The story of Ethereum’s rapid transformation into a stand-alone asset has been around for a while. The concept has drawn considerable attention in recent months, and especially since October 1, ETH has seen growth that outperformed Bitcoin.

In early November, the one-month observed correlation between the BTC / ETH pair fell to an all-time low of 60%. In addition, since the beginning of the year, while Bitcoin grew 105%, ETH has grown 505% with almost 5x outperformance.

The outperformance of ETH versus Bitcoin is perhaps best reflected in the last few months, with the ETH / BTC pair continuously moving in an upward trend, although the overall market has experienced a significant downturn since the beginning of December, the ETH / BTC- accumulated Pair further, quickly rising 13% to hit a three-year high.

ETH / BTC price chart | Source: Tradingview

The story of “flipping”

The Binance exchange team believes that the activity described above – when ETH was able to garner multiple independent market support against Bitcoin – is rather unusual considering that the ETH / BTC pair has a tendency towards trending.

“This doesn’t mean that ETH parted with BTC, but it clearly shows that not all altcoins are involved in the BTC movement.”

“It is important that ETH can no longer be viewed as an altcoin, but as a token with unique properties. The main drivers behind the recent surge can be attributed to the growing Metaverse, GameFi and NFT stories, all of which are primarily based on the Ethereum network. ”

Although ETH is not yet fully independent, a Binance spokesperson stressed that this is no longer a pipe dream as the overall story has started to change thanks to the use cases and the introduction of Ethereum.

In addition, the analyst pointed out that a similar scenario is very likely for a number of other prominent altcoins as well.

“Just like with traditional stocks, there will be no distinction between ‘Bitcoins and Altcoins’, but that the prices of all tokens will be controlled independently of each other through both systematic and non-systematic risks.”

Igneus Terrenus, communications chief at the Bybit exchange, said that the value of a digital asset has so far been determined by its financiers and investors. With over 6 years of development and many smart contracts, applications based on Ethereum – including those related to the emerging space like DeFi and NFT – ETH now has its presence and growing ecosystem of communities that exist independently of Bitcoin, especially in the past, year increases.

“The correlation will remain, however, but there is now enough divergence to maintain a divergence in price action.”

Ethereum has a unique position in the market

Netta Korin, co-founder of Orbs, a public blockchain infrastructure, pointed out that ETH’s upward trend since October 1 has given a boost to the narrative that Flippening is in the near future. While the majority of the other cryptocurrencies continue to have a high correlation with BTC, she said that ETH has clearly shown itself to be a “catalyst for dApps”.

According to Korin, Ethereum has long overtaken Bitcoin as the most widely used blockchain and has performed significantly better than BTC even after recovering from the market downturn. She added that the upcoming Eth2 upgrade will “increase demand”.

“Ethereum’s new supply and demand mechanism and its role as the leading financial infrastructure and critical backbone for some of its most popular projects, notably MakerDAO and Uniswap, have shown that ETH is on the way up. More independent.”

Korin also pointed out that Ethereum is a major player in DeFi and a central platform for the NFT space looking to build financial applications for lending and trading on the blockchain – with currently more than 3,600 active dApps in the Ethereum ecosystem. Additionally, due to its links to the DeFi and NFT markets, two sectors that grew exponentially in 2021, ETH can also act as an inflation hedge.

“ETH is well on the way to overtaking Bitcoin as the leading cryptocurrency by market capitalization,” concluded Korin.

Can ETH’s continued independence affect BTC?

If a fork is imminent as an independent asset of ETH, will it affect BTC’s potential upward movement if the ETH / BTC pair starts rising?

On this subject, a member of the Binance research team pointed out that it would be wrong to assume that if the price gap between ETH and BTC continues to grow on its current path, the development that could affect the overall growth of BTC would be.

“Large investors will continue to buy BTC no matter how pessimistic it looks on the chart or how other altcoins perform. They do this because BTC is still a trailblazer. This is further fueled by the narrative of BTC as a digital store of value and inflation protection. ”

The Binance analyst admits that he still has to reckon with an appetite among institutional and private investors if they increase their involvement in ETH.

ETH’s growing influence has been noticed by major global financial institutions, including US banking giant JPMorgan Chase to explain in a recent report that ETH may be a better option than BTC for investors, especially as the digital asset market continues to mature and develop. According to research analysts, a five-fold increase in the price of ETH versus BTC this year has resulted in a market capitalization of almost half that of Bitcoin.

Another aspect of ETH that is attracting investors is its potential to gain a foothold in the burgeoning Web 3.0 ecosystem, which is very popular, although a real implementation is not yet feasible. While no one can be sure how this space will continue to grow, it is likely that in the future ETH will gain most of the value associated with decentralized Web 3.0.

Last but not least, it should be noted that the London hard fork of the Ethereum network, introduced in August 2021, changed the way gas fee rates are calculated, effectively burned part of all fees and reduced the overall offerings of ETH. In fact, this has resulted in ETH’s annual inflation rate dropping from ~ 4% to ~ 3%.

In addition, the constantly evolving monetary policy of the network is intended to help the ETH turn into a deflationary asset, making it attractive to both long-term owners and institutional funds. As a result, the perception of ETH as an asset in its own right will continue to gain in importance.

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