How low can Ethereum price drop versus Bitcoin amid the DeFi contagion?
Ethereum's native token Ether (ETH) has declined by more than 35% against Bitcoin (BTC) since December 2021 with a potential to decline further in the coming months.
The ETH/BTC pair's bullish trends typically suggest an increasing risk appetite among crypto traders, where speculation is more focused on Ether's future valuations versus keeping their capital long-term in BTC.
Conversely, a bearish ETH/BTC cycle is typically accompanied by a plunge in altcoins and Ethereum's decline in market share. As a result, traders seek safety in BTC, showcasing their risk-off sentiment within the crypto industry.
Interest in the Ethereum blockchain soared during the pandemic as developers started turning to it to create a wave of so-called decentralized finance projects, including peer-to-peer exchange and lending platforms.
That resulted in a boom in the total value locked (TVL) inside the Ethereum blockchain ecosystem, rising from $465 million in March 2020 to as high as $159 billion in November 2021, up more than 34,000%, according to data from DeFi Llama.
Interestingly, ETH/BTC surged 345% to 0.08, a 2021 peak, in the same period, given an increase in demand for transactions on the Ethereum blockchain. However, the pair has since dropped over 35% and was trading for 0.057 BTC on June 26.
ETH/BTC's drop coincides with a massive plunge in Ethereum TVL, from $159 billion in November 2021 to $48.81 billion in June 2022, led by a contagion fears in the DeFi industry.
Also, institutions have withdrawn $458 million this year from Ethereum-based investment funds as of June 17, suggesting that interest in Ethereum's DeFi boom has been waning.
Bitcoin has faced smaller downsides compared to Ether in the ongoing bear market.
BTC's price has dropped
Read more on cointelegraph.com
