Historic Analysis of Crypto Economic Market Cycles: BTC vs ETH vs LINK

How and When to Invest in Alt coins during BTC breakouts of All-time highs is addressed through historical chart analysis

Interactive chart on TradingView:

Historical Analysis: BTC vs ETH vs LINK and other Alt Coins

Summary:

As our market cycle shifts phase from a bull run of BTC below all-time highs (ATH) to an environment where BTC is breaking out above ATH, it is important to look back on history and see how ETH and alt coins performed in this environment. Did ETH hold up as BTC broke out? Which asset outperformed and in what ORDER?

Legend:

Red and Green Candle Chart — ETH/BTC — up means ETH is winning vs. BTC — this could mean ETH vs. USD is going up more than BTC vs. USD or it could mean BTC is being turned into ETH.

Light Blue Line Chart — BTCUSD — up means BTC is winning vs. USD — this represents investors bringing new money into crypto and specifically bitcoin.

Dark Blue Line Chart — LINKBTC- (beginning July 2019) — up means LINK is winning vs. BTC — this study is included to investigate if similarities could exist in the sense of LINK being in what was previously ETH position in the sense of a hot new (under priced) Alt coin entering the market. ETH and LINK are very different functionally in the crypto ecosystem, but perhaps this shows how investors flock to new Alts during periods of mania euphoria and how they tend to out perform BTC which I suspect will have a lower beta (volatility).

Black Horizontal Dashed Lines — represents support / resistance levels to exchange rates

Red Curve Line — 50-week Moving Average of ETH/BTC

Orange Slanted Lines — Trend lines for ETH/BTC

Green Slanted Line — Trend lines for LINKBTC

Pink Verticals — Timeline of Events:

1. Jan 2017 — BTC/USD Breaks above ATH of $1000 — ETH leads the charge in the 2017 bull run (Main Chart: ETH/BTC) (6-month ETH beats BTC).
2. June 2017 — ETH/BTC Peaks — BTC then takes the hand off and outperforms both while BTC/USD sells off as investors flee both assets in the correction
3. Dec 2017 — ETH/BTC bottoms at historical .0277 ETH per BTC S/R inflection point (black dashed line) as BTC/USD tops. ETH starts to outperform BTC (for 1 month) as BTC/USD massively crashes. Then both continue to crash vs. USD. Both go through a 1-year bear market. (Orange Trend Line down) 3b — Dec 2018 — Crypto Bear Market bottoms as shown by BTC/USD bottoming.
4. Oct 2019 to Dec 2019 — ETH/BTC and LINK/BTC exchange rates consolidate to form “new normal” at the .0277 price BTC per ETH where then ETH/BTC starts to trend up.
5. June 2020 — DeFi bubble begins
6. Sept 2020 — DeFi bubble tops and LINK begins massive sell off
7. Dec 2020 — BTC breaks ATH and the cycle begins again…

Conclusions:

1. ETH, LINK, and other “hot alts” led the charge with higher % gains vs. BTC after BTC breaks out of ATH.
2. ETH, LINK, DeFi, and the next class of “hot” alt coins will outperform for 1st 1/2 of the breakout vs. BTC (approximately 6 months).
3. If the present is similar to the past, in or around June 2021, BTC will take the handoff for the 2nd half of the breakout bull run while the Alt bubble maxes out from a short term USD correction. The BTC uptrend will continue for approximately another 6 months while Alts sell off.
4. Historic 0.0277 ETH/BTC (approximately 36 ETH per BTC) was found to be a key level inflection point). We are returning to this level now that BTC is breaking out. 32 ETH per BTC is now being talked about as the new standard because of 32 ETH is required for running a node and receiving staking rewards on ETH 2.0 which went live Dec 1st 2020.
5. I expect ETH (currently $650) to have a bull run vs. USD in order to restore the 32 ETH per BTC and perhaps to exceed this with ETH getting as strong as 8 ETH per BTC (0.126 ETH per BTC shown as the higher black dashed line).
6. If BTC goes to 100k per coin (5x from 20k breakout) which is my minimal target on this breakout over the next year, that would give ETH a price of 8 ETH per BTC when BTC hits its half-way point of 50k. 50/8 = $6000 per ETH. This ratio would then plummet back down to 32 ETH per BTC as BTC goes to 100k. 100/32= $3000 per ETH. This is in line with other estimates I’ve seen being talked about in the crypto podcasts and channels I follow.
7. The top in ETH/BTC (halfway point) would result in a 2x increase in BTC market cap and a 10x increase in ETH / altcoin market cap. These ETH and BTC gains may be tempered by a healthy growth in DeFi coins such as represented in the Power Index by Power Pool (PIPT), PieDAO’s DeFi++, and DeFi Pulse’s DPI, and oracles such as LINK. LINK though has seen its first major bubble pop ($20 down $8 and currently $13.50). Sometimes Alt coins do not return to their original bubble prices but LINK in my opinion will. I am also bullish on EWT the energy web token as I am a solar developer and I see this coin as one of the best long-term investments because of what we are building in solar — the decentralized energy grid which will need energy trading infrastructure on blockchain.
8. Many numbers in my analysis may seem unbelievable, but when you consider the major events of 2020: ETH 2.0 staking rewards, June-Sept mania of the DeFi, advent of yield farms and Uniswap / Balancer liquidity pools, recent halving in BTC, global money supply increases due to the pandemic, PayPal offering support for crypto, Square and Micro Strategy using BTC as a standard of accounting, and Micro Strategy 450MM purchase of BTC, the recipe is set for such moves. New investors in crypto are the institutional whales unlike the 2017 bull run, these investors have much larger positions to establish. New entrants will quickly learn holding ETH and staking either on a private node or within yield farms fares far better and higher yield than BTC which offers no yield at all or even wrapped BTC (wBTC) which offers lower yields.
9. My personal portfolio consists of 40+ alt coins I’ve been researching this year and yet I plan to keep BTC and ETH at a minimum of 1/3 each. The other coins each taking just a sprinkling of my investments.
10. Understanding the rise of ETH and the fall of BTC dominance inside of the continued rise of BTC to 100k and onwards to 1MM, is further supported in an interesting and insightful twitter post by Raoul Pal.

Although there is an unanswered and much debated question in this thread which I have yet to understand fully: how does the growth of the Ethereum network (including other coins being built on top of ETH as ERC20 tokens) directly cause ETH demand? Gas fees alone don’t seem to do it for me as a sufficient reason. For me personally, I use ETH as a currency to buy other Altcoins and pay gas fees as a sort of brokerage fee to trade. This is similar to using BNB when I trade on Binance. ETH 2.0 staking will drive ETH demand and truly establish it as more of the major currency of crypto because you will do more transactions in it and value other crypto in terms of it (easier standard of accounting than all the .0000 of BTC prices) and since so many are on ERC20 standard which means they can store in your MetaMask wallet. Bitcoin is likely more a base layer and a store of value, I agree.