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Blocksmith Says: Renewed Run-Up, But ETH to Underperform BTC

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A few weeks ago we were considering the spread between Ethereum and Bitcoin (XETXBT) and noted that it looked to be running into a mature phase and was likely to top out. It had more power than expected and pressed on higher, but yesterday cracked at a key support-resistance level going back to May 2021. Not only did it crack but there was a real gap down.

In other words, the session high at the close was below the previous session’s low creating a price vacuum.

Since the start of the data in February 2018, there have only been 29 such real down gaps, so they are fairly uncommon. In terms of long-term average performance out of them, there isn’t much significance (under minus 1% returns over 5 and 10 days). However, since last May in the chart, we can see that XETXBT has a particular personality at tops: it tends to spike and collapse. The average downswing after a spike and drop is minus 28%.

The expectation for both series is a renewed run-up quite soon and it’s not unreasonable to assume therefore that Ethereum will underperform Bitcoin.