Is the rising price of bitcoin a signal of a bull trap? That's the question seasoned crypto analysts have begun asking after Bitcoin rose to $8,500 this week, up more than 25 percent since early April. Therefore, many investors and traders are wondering if the market's decline is truly over, judging by this one-day gain.
Recently, the ETH/BTC indicator, which tracks the prices of ether in comparison with bitcoin, has been behaving strangely. Previously, the rise in the price of ether compared to bitcoin was considered a negative trend for bitcoin, which meant that most traders wanted to exchange bitcoin for ether, the second major cryptocurrency in the world.
However, this time bitcoin is in the lead.
After the price peaked at $6,400 as of April 1, the subsequent recovery of BTC seems to have helped the too-low ether price regain balance (ETH fell by 53.8 percent in March, and BTC fell 32 percent). Thus, the argument that the increase in the price of Bitcoin may be a bull trap is not convincing this time.
According to historical data, the ETH/USD pair and Bitcoin are inversely related, and are indicators for each other.
The inverse relationship is based on the fact that fiat funds enter the cryptocurrency market through underlying digital assets such as BTC. Then, when Bitcoin's valuation looks negative, money is invested in relatively cheap alternative cryptocurrencies, altcoins.
The following is an overview of historical prices:
On June 13, 2017, the ETH/BTC pair reached $0.15, and on July 15, 2017, the BTC/USD pair dropped to $1,826.20.
On December 8, the pair ETH/BTC fell to $0.02, and on December 17, the BTC/USD pair went down from $19,891.
On February 1, the ETH/BTC pair became bearish with a high of $0.12, and on February 6, the BTC/USD pair dropped to $6,000.
However, this time, ETH/BTC is rising along with bitcoin, which means that the price of bitcoin rising in tandem with the ETH/BTC exchange rate.
However, this does not mean that this time is completely different.
Money is still moving from bitcoin to lesser-known types of cryptocurrencies, according to the Bitcoin Dominance Rate from CoinMarketCap, which tracks Bitcoin's percentage of the total cryptocurrency market capitalization.
According to these indicators, the BTC dominance rate exceeded 45.62 percent on April 2 and fell to 40 percent yesterday - the lowest since March 1, indicating growing investor interest in other types of cryptocurrencies.
It seems logical that the level of dominance of other (lesser known cryptocurrencies) has sharply increased from 17 to 24 percent over the past four weeks..
If bitcoin indicates a long-term trend change from bearish to bullish, then money may flow back into bitcoin from lesser-known altcoins, thereby increasing the level of BTC dominance.
In this case, the increase in the price of ETH/BTC may stop.
According to https://www.coindesk.com
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