Ethereum Outperforms Bitcoin Since July 2022, Up 61%

The crypto market has been at the forefront since the start of the year, outperforming other asset classes by a significant margin. Almost all cryptocurrencies, including Bitcoin and Ethereum, have posted impressive rallies, with BTC slightly outperforming ETH so far this year.

However, an analysis of the price development of the two largest cryptocurrencies by market capitalization shows that Ethereum has outperformed Bitcoin since the beginning of July last year.

Crypto Market Rally as Hong Kong Announces Positive Regulations

Hong Kong has recently drawn up plans to allow retail investors to trade certain cryptocurrencies on licensed exchanges. The move marks a significant improvement in the city’s regulatory regime which previously banned all retail investors from trading crypto.

The growing narrative of Asian flows likely helped the crypto market gain further strength. However, an assessment of Bitcoin’s trading session returns shows that this narrative is exaggerated, blockchain research firm Arcane said in a recent report.

The report added that since Bitcoin bottomed in November, the flagship cryptocurrency has seen “a healthy and stable uptrend” in Asian hours, while returns during the US session have been more erratic. Furthermore, the big rallies in January happened during the US trading session, while last week’s rally happened in European hours.

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Ethereum has outperformed Bitcoin since July 2022

Last June, the price of Ethereum was under a lot of pressure when Celsius’ exposure to Lido Staked Ether (stETH), a token representing staked ETH in Lido, led to a massive selloff. Ethereum finally bottomed out at the end of that month after falling below $1,000.

Since July, the second largest cryptocurrency has gained around 61%, data from Arcane shows. In the same period, Bitcoin registered 29%. As for why Bitcoin has underperformed since last July, the answer lies in global market liquidity.

An assessment of BTC’s relationship to liquidity by Noelle Acheson, former head of market insights at crypto lender Genesis, reveals that BTC’s lack of cash flows makes the coin highly responsive to changes in global market liquidity. Arcane said:

“We would also add that we believe that part of BTC’s extremely strong correlation to US stocks in 2022 was driven by the massive focus on growth by companies associated with the crypto industry during the bull market, leading to excessive leverage, in addition to BTC’s indirect relationship with growth asset through Tesla’s significant BTC exposure.”

It is worth noting that BTC and Nasdaq continue to have a strong correlation during US trading hours. Both indices rose in early January amid optimism about slowing inflation and reopening in China. Arcane noted that Bitcoin’s outperformance is likely driven by global demand.

Meanwhile, the current upswing in the crypto market is likely caused by internal forces. Bitcoin and Ethereum rose around 15% last week despite growing regulatory pressure in the US. Furthermore, there was no specific development in broad financial markets that could have driven the upswing.

This shows signs of independent crypto strength and potential decoupling from equities. “This is a positive trend, as it could revive external demand for BTC as a portfolio diversifier,” Arcane said.

Still, Bitcoin is trading above $24,100, down about 2% on the day. Ethereum is hovering around the $1,640 mark, also down by around 2%. The broader crypto market has been largely flat over the past 24 hours.

Do you think the crypto market will resume its uptrend despite increasing regulatory pressure? Let us know in the comments below.

About the author

Ruholamin Haqshanas is an accomplished crypto and financial journalist with over two years of experience writing in the field. He has a solid grasp of various segments of the FinTech space, including the decentralized iteration of financial systems (DeFi), and the emerging market for non-fungible tokens (NFT). He is an active user of digital assets for money transfers.