As of Thursday, 20 January, both the price of Bitcoin (BTC) and Ethereum (ETH) have plummeted.
However, the magnitude of the collapse has been different.
Bitcoin and Ethereum, from ATH to the crash
What is surprising is that, although the magnitude was different, the two dynamics seem to have been almost synchronous.
They have actually been since the beginning of the year.
Bitcoin’s price ended 2021 at around $46,000, which is already down 33% from its all-time high in early November.
ETH on the other hand, ended 2021 at about $3,700, which is about 23% lower than the all-time high, which occurred at the same time as Bitcoin’s.
So from 10 November, the day of the highs, to 31 December ETH had lost less than BTC.
The first sharp drop occurred between January 5 and 6, when BTC lost 8% in a single day. On the same day, ETH lost 13%.
The three declines of BTC and ETH in 2022.
The first significant drop in 2022 has already seen ETH lose more than BTC, but the reason for this difference could be found precisely in the fact that it had previously lost less.
It is worth noting that the strong declines in the price of ETH in this January 2022 always occurred at the same time as those of BTC.
The second sharp drop occurred between January 20 and 21, when the price of Bitcoin fell by 10% in one day, while the price of ETH in the same period lost more than 15%.
The third drop occurred the next day, which was between 21 and 22 January. Bitcoin went from over $39,000 to less than $35,000, with a second drop of more than 10% in one day. Ethereum, on the other hand, went from $2,800 to $2,300 in the same period, with a loss of 18%.
Adding up all the losses, over the course of January 2022, Bitcoin’s price fell by 24%, while Ethereum’s fell by 38%. The difference is significant, especially since the timing coincides so closely.
However, if instead of only taking into account the January declines, we go back to the day of the peak, 10 November 2021, the cumulative loss is 49% for BTC and 50% for ETH. This reveals that the reason behind ETH’s sharp decline in 2022 is solely the fact that it was down less in December 2021.
In fact, analyzing the dominance trend, we find that on 10 November, Bitcoin’s dominance was 41.6% and Ethereum’s was 18.4%, according to CoinGecko data. By the end of December, that of Bitcoin had dropped to 38.2%, while that of Ethereum had risen to 18.9%. By contrast, Bitcoin’s has now risen again to 38.9%, while Ethereum’s has fallen to 17.1%.
It is worth noting, however, that dominance is calculated based on market capitalizations, including those of stablecoins. From this point of view, the market cap of stablecoins pegged to the US dollar never undergoes significant changes in the short term, so it is inevitable that when the prices of BTC and ETH fall, their dominance will also inevitably fall.