Ethereum Faces Continued Downtrend Against Bitcoin as Analysts Warn of Falling Knife Risks

• Ethereum’s recent performance against Bitcoin highlights ongoing challenges, with Ether struggling to maintain value as market dynamics shift.

• As ETH descends toward multi-year lows, analysts caution that the cryptocurrency could face further declines amidst a competitive landscape.

• According to crypto analyst Alessandro Ottaviani, Ether’s situation resembles a “falling knife,” indicating the potential for continued price erosion.

Ethereum’s struggle against Bitcoin intensifies, with multi-year lows and competition from Solana weighing heavily on the altcoin’s value.

Falling knife warning furthers sell-off risks

On March 13, ETH/BTC—a pair that tracks Ether’s strength against Bitcoin—dropped by over 1.50% to reach $0.022, its lowest level since May 2020. This dramatic decline has raised alarms about Ether’s vulnerability, further emphasizing its weakness relative to Bitcoin.

Ethereum’s downtrend has persisted since its all-time high of $0.156 in June 2017. Since that peak, ETH has plummeted by more than 85%, underscoring a long-term trend of diminishing strength against Bitcoin.

Analyzing the two-week ETH/BTC chart reveals that the relative strength index (RSI), which gauges whether an asset is overbought or oversold, has fallen to an unprecedented low of 23.32. Typically, an RSI reading below 30 suggests oversold conditions that could enable a price rebound.

However, in Ethereum’s case, the RSI has continued to decline over the past two months, suggesting that instead of finding support, Ether’s downtrend is intensifying. Analyst Alessandro Ottaviani noted that this “falling knife” scenario often deters investors from stepping in too early, compounding the downward momentum.

To signal a potential reversal, traders will focus on whether the RSI stabilizes and if critical resistance levels can be reclaimed. A key indicator will be a rebound from the 0.022 BTC level, which had previously limited ETH/BTC’s decline in late 2020, culminating in a significant 300% rally.

If such a rebound occurs, it may drive the ETH/BTC pair toward its 0.382 Fibonacci retracement line, approximately 0.038 BTC, and align with the 50-week exponential moving average (50-week EMA). Until that rebound materializes, the technical outlook indicates that ETH/BTC could remain ensnared in its downward trajectory, with further targets potentially reaching historical support levels in the 0.020-0.016 BTC range.

ETH/BTC fundamentals support a bearish outlook

Ether’s prospects for further decline against Bitcoin are not solely rooted in technical analysis; broader fundamental trends also play a crucial role. One significant factor is the intense competition from rival layer-1 blockchains, particularly Solana (SOL).

Reports from VanEck reveal that Solana’s decentralized exchange volume has surpassed Ethereum’s, even amidst a broader downturn in memecoin trading activity. This dynamic points to a growing preference for Solana, which has consistently increased its trading volume amid Ethereum’s declining activity.

Furthermore, the launch of spot Bitcoin ETFs has fundamentally altered the traditional crypto market cycle that historically favored Ethereum and other altcoins. After Bitcoin typically surged post-halving, capital would rotate into altcoins—triggering what is termed “altseason.” However, the staggering inflows of $129 billion into Bitcoin ETFs in 2024 have disrupted this pattern, siphoning liquidity away from the broader altcoin market, including Ethereum.

Compounding these external pressures, Ethereum has also faced specific selling pressure. The recent Bybit hack led to significant ETH liquidations, with some of the liquidated assets being laundered via decentralized platforms like Thorchain. This wave of selling activity may still have lingering impacts, further undermining ETH’s relative value in the market.

Conclusion

In summary, Ethereum’s current performance against Bitcoin reveals a multitude of challenges, both technical and fundamental. The ongoing downtrend paired with intensified competition and fundamental shifts in the market landscape creates a precarious situation for ETH. Investors and traders are urged to exercise caution and remain vigilant for key reversal indicators amidst these prevailing conditions.