Untitled design 16 The DeFi Dip: How low can ETH price drop versus Bitcoin amid the DeFi contagion?

The DeFi Dip: How low can ETH price drop versus Bitcoin amid the DeFi contagion?

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* Ethereums 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.
* ETH/BTC dynamics
* The ETH/BTC pairs bullish trends typically suggest an increasing risk appetite among crypto traders, where speculation is more focused on Ethers 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 ETHs decline in market share. As a result, traders seek safety in BTC, showcasing their risk-off sentiment within the crypto industry.
* Ethereum TVL wipe-out
* Interest in the Ethereum blockchain soared during the pandemic as developers started turning to it to create a wave of so-called decentralized finance (DeFi) 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 DefiLlama.
* 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/BTCs 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* Also, institutions have withdrawn $458 million this year from Ethereum-based investment funds as of June 17, suggesting that interest in Ethereums DeFi boom has been waning.
* Bitcoin struggling but stronger than Ether
* Bitcoin has faced smaller downsides compared to Ether in the ongoing bear market.
* BTCs price has dropped nearly 70% to around $21,500 since November 2021, versus Ethers 75% drop in the same period.
* Also, unlike Ethereum, Bitcoin-focused investment funds have seen inflows of $480 million year-to-date, showing that BTCs drop has done little to curb its demand among institutional investors.
* ETH/BTC downside targets
* Capital flows, coupled with an increasing distrust in the DeFi sector, could keep benefiting Bitcoin over Ethereum in 2022, resulting in more downside for ETH/BTC.

 

The DeFi Dip: How low can ETH price drop versus Bitcoin amid the DeFi contagion?
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