There’s no magic formula for timing the crypto market, but the ETH/BTC ratio has become a go-to tool for investors trying to wrap their head around where things are headed.

Bitcoin (BTC) has been on fire this November since Donald Trump won the United States presidential election, recently tapping above $94,000 USD or $144,000 AUD. You’re probably wondering, “When are Ethereum (ETH) and the other cryptocurrencies going to have their big moment?” One key metric could offer us some clues — let’s break it down.

The ETH/BTC ratio gives traders a better signal of market sentiment 🚀

The ETH/BTC ratio — which shows how much 1 Ethereum is worth compared to 1 Bitcoin, similar to fiat currency pairs such as the AUD/USD exchange rate — gives crypto traders a better idea at any point in time into how Ethereum’s performance is stacking up against Bitcoin, the two leading cryptocurrencies by market capitalization.

When the ETH/BTC ratio rises, it means that Ethereum is gaining relative strength compared to Bitcoin, and when it falls, it is losing momentum against Bitcoin. 

While the ratio tracks the relationship between just Ethereum and Bitcoin, it offers much more to traders — it can signal shifts in risk appetite in the wider crypto market and even act as an indicator for the much-loved term for crypto degens, “altcoin season.”

When the ETH/BTC ratio rises, it suggests that Ethereum is relatively outperforming Bitcoin, which could signal that investors are becoming more willing to take on risk, moving away from Bitcoin, often seen as the ‘safe haven’ cryptocurrency.

On the flip side, if the ratio drops, it can indicate uncertainty among market participants as investors favour Bitcoin’s perceived stability.

Traders may use theETH/BTC ratio to figure out the best time to rotate their capital, especially during a bull run.

Historically, a bull run begins with Bitcoin breaking through its previous all-time highs and grabbing a larger share of the crypto market.

ETH/BTC ratio may present buying opportunities for investors 💪🏼

When investors feel they have almost run out of growth on Bitcoin for the time being — usually when they feel that Bitcoin dominance is topping out — they start rotating their capital into other crypto assets, and move up the risk curve. 

Typically, this is when the ETH/BTC ratio starts to see upward movement.

Historical data shows that when the ETH/BTC ratio hits a low — or “bottoms out,” as investors say — it may signal a buying opportunity for Ethereum. We call it ‘buying the dip’.

In March 2021, the ETH/BTC ratio was around 0.030. By May 2021, it had risen to 0.077, and during that time, the price jumped from $1,628 USD to $3,928 USD, a spike of approximately 140%, according to TradingView data.

Similarly, in June 2022, theETH/BTC ratio was around 0.054, and just two months later in August 2022, the ratio reached 0.079. During that time the price saw an increase of $1,127 USD to $1,936 USD.

The ETH/BTC ratio reached its highest point of 0.1189 in June 2017. 

However, with Bitcoin's market cap currently about five times larger than Ethereum's at $1.81 trillion, the ratio will never exceed “1” unless Ethereum’s market cap overtakes Bitcoin's — a scenario still considered possible by Ethereum maximalists, referred to as "the flippening."

Wrap up thoughts

The ETH/BTC ratio, like any financial metric, is a good starting point for trying to understand momentum and how Ethereum is performing relative to Bitcoin. 

While it can signal wider market sentiment, it shouldn’t be the only factor you rely on for jumping into cryptocurrency investments.