The Chicago Mercantile Exchange (CME) Group, a prominent derivatives marketplace, recently released a report discussing the interplay between Bitcoin and Ethereum ahead of the 2024 halving event. According to the report's author, Erik Norland, CME Group's senior economist, Ethereum could potentially outperform Bitcoin even if BTC experiences a post-halving rally, which involves cutting its issuance in half.
Ethereum and Bitcoin have shown a notable correlation before halving events, and with the upcoming 2024 halving on the horizon, the market is likely to experience ripple effects due to Bitcoin's significant market capitalization and status. Historically, Bitcoin halvings have not only supported BTC prices but also led to positive movements in altcoins. Despite Bitcoin's increasing independence as a distinctive asset class, its high correlation with altcoins, especially legacy coins like Ethereum, continues to influence their prices. A recent report even indicates that Bitcoin's correlation with the Nasdaq reached a two-year low.
The report acknowledges the correlation between Ethereum and Bitcoin, examining how the ETHBTC pair has behaved over time. However, Erik Norland identifies other potential factors that could trigger a Bitcoin bull run and subsequently impact the ETHBTC pair, potentially leading to Ethereum outperforming Bitcoin in 2024. Among these factors, the ongoing tensions between Russia and Ukraine, which may increase the demand for Bitcoin, leading to price surges, are highlighted. Additionally, the report emphasizes the unexpected influence of events like the collapse of regional banks, which occurred in March 2023, temporarily boosting prices for both Bitcoin and Ethereum.
Despite the possibility of a Bitcoin rally based on past price performances, the report remains cautious about the accuracy of predictions and the influence of various factors. The Forex market is likely to closely monitor these developments, considering the potential impact on cryptocurrency valuations. As the market matures over the years, past halvings have resulted in price surges for Bitcoin, but historical patterns may not necessarily repeat.
The report delves into macroeconomic factors, particularly central banks' monetary policies, and their potential impact on Bitcoin and Ethereum prices. Notably, the Federal Reserve's recent decision to increase interest rates contributed to a temporary surge in Bitcoin prices, but they are currently trending lower at around $30,000. Looking back, central banks' policies in 2020, involving rate reductions and quantitative easing, drove ETH and BTC prices to all-time highs. However, the emergence of inflation in 2021 prompted central banks to adjust their strategies and increase rates, leading to a crypto winter from which many coins, including Ethereum, are still recovering. Forex traders need to closely monitor central bank actions, as they can significantly influence the price movements of Bitcoin and Ethereum in the crypto market.