Ethereum Looks Better Than Bitcoin Here (ETH-USD)

Thesis Summary

Ethereum (ETH-USD) has rallied strongly with the broader crypto market, and it seems like a bottom could be in. If this is the case, and you feel like you missed the boat, there’s no need to worry. History suggests there will be a chance for investors to get in at more favorable prices.

Furthermore, given the current fundamental and technical outlook, I believe Ethereum could outperform Bitcoin (BTC-USD) in 2023, though I still advise holding both coins for the long-term.

EWT Outlook

First off, let’s begin by looking at the EWT outlook for Ethereum. Below I present two possible counts:

I’ll try to be as concise as possible. Since around April 2021, ETH has been completing an ABC correction. Back in June 2022 Ethereum dipped under $1000, passing the 38.2% retracement level, and giving us sufficient price action to count five impulsive waves to the downside. If this is correct, then the low is in, and what we are now setting up is a 1-2 structure inside a larger wave III marked in blue.

However, until the wave I high is broken convincingly, we could also count all the moves since the June low as an ABC for wave 4. This count can be seen in black. This would mean that we still have a final leg lower to go, which could take us down into the $700 region. This represents the next key fib level, the 50% retracement, and would also be close to the 2 ext of the wave 1 in red measured from the top of wave 2.

At this point, not having some exposure to Ethereum is a risk, though we could still get another good chance to go long in the wave 2 of III.

An Eerie Similarity

History doesn’t repeat itself, but sometimes it rhymes, and if that’s the case, the chart below is definitely worth looking at,

This chart compares the dynamics that played out in the 2019-2020 correction and what we are witnessing today, and we can see some similar dynamics are in play. These dynamics are the result of supply and demand distribution and the market testing resistance and support levels.

In 2020, ETH sold off and almost broke its recent lows, and if this plays out again, then we should see Ethereum hit near $1000 again. However, this will depend broadly on the macroeconomic outlook, something which I’ve discussed more in depth in my marketplace.

In 2019, the COVID crash contributed towards a sell-off. Another event of such magnitude seems unlikely at this point, but numbers suggest the economy could be heading into a recession, and the Fed is not done tightening.

Will Ethereum outperform Bitcoin?

The big question though, if you are already invested in crypto, is which of the two major coins will perform better in 2023.

From a fundamental side, there’s a lot to say in favor of the Ethereum network. It has more use cases, an expanding ecosystem and a deflationary currency:

The only real concern for Ethereum is regulation, since this cryptocurrency could be treated as a security moving forward. This seems less likely with Bitcoin, which is being considered more like a commodity.

Now, from a technical perspective, the ETH/BTC chart also looks ready to head higher:

We are hovering just above the trendline in ETHBTC, suggesting we should at least be able to rally into the upper resistance. From a charting perspective, this could arguably be identified as a “cup and handle” structure, which would also imply a break to the upside is in the cards.

Takeaway

In conclusion, Ethereum looks like a bottom could possibly be in. For those that missed the train, history suggests we might get another chance to add much closer to the bottom, but a lot of this depends on the macroeconomic outlook.

Looking into 2023, a strong case can be made that Ethereum can outperform Bitcoin. Still, I advise holding both, as I see these cryptocurrencies as complementary. And of course, tokens needed for Ethereum scaling should also perform well if/when Ethereum rallies. A clear example of this is Polygon (MATIC-USD).