The ratio of ETH to BTC has fallen to 2018 levels, with Ethereum underperforming.
Ethereum is undervalued according to Morgan Stanley analysts
Yesterday, Morgan Stanley‘s crypto analysts, led by Sheena Shah, wrote in a note to the bank’s clients that ETH (Ethereum) is experiencing “underperformance” as it did in 2018.
In particular, they refer to the ratio of ETH to BTC, which has fallen to 0.053 BTC per ETH.
For instance, in the last seven days this ratio has fallen by 9%, while in the last 30 days it has fallen by as much as 23%. That is, in recent weeks ETH has been losing more than BTC.
Since May last year, it had risen above 0.05 BTC, and then even reached 0.08 BTC in December. So the current level is still higher than it was at the beginning of 2021, but far lower than at the beginning of 2018, when it had also surpassed 0.11 BTC.
By contrast, the current 0.053 BTC per ETH is very close to the 0.054 BTC touched in April 2018, before this ratio fell all the way below 0.03 BTC at the end of 2018. The lowest peak in recent years was below 0.017 BTC in September 2019.
Analysts at Morgan Stanley pointed out that in recent months, the price of ETH has fallen about 75% since its peak in November 2021, commenting that when the ETH/BTC ratio collapses it is a sign that enthusiasm for cryptocurrencies is waning.
They also stated that although the current price cycle may be similar to that of 2018, this time it is largely institutional investors who are selling, whereas in 2018 it was mostly retail investors.
As for Bitcoin, they argue that the level to watch out for is $19,500, more or less the maximum price touched in the previous cycle, in December 2017.
The crypto meltdown and macroeconomic uncertainty is also reflected in stablecoins
They also point out that there has been a contraction in the amount of stablecoins in circulation.
For example, since before Terra’s implosion, USDT’s market capitalization has fallen from $83 billion to $70 billion, while USDC’s has only risen from $48 billion to $54 billion. BUSD’s, at $17 billion, is in line with what it had in April, while DAI’s has fallen to $6 billion from $8 billion at the beginning of May.
Sheena Shah points out that dollar liquidity is being withdrawn from the markets, and expectations of higher interest rates from the Fed are also having a negative impact on cryptocurrency prices.
Morgan Stanley’s crypto analysts give no indication of how this situation might evolve, but point out that it is definitely critical. However, they admit that this criticality is not only due to the normal cryptocurrency cycle, but to a large extent to criticalities that are present in all financial markets at the moment.