Why are traders obsessed with the ETH/BTC ratio: the key to understanding altcoins

If you have ever seen the ETH/BTC chart and wondered why experienced crypto traders constantly watch it, we have the answer for you. This ratio is not just a numerical indicator; it’s a signal of how the market chooses between two poles: Bitcoin’s stability and Ethereum’s potential. And judging by the behavior of the broader altcoin market, this choice has serious consequences.

What Does the ETH/BTC Ratio Really Mean

Let’s start with the basics. The ETH/BTC ratio is calculated by dividing the price of Ethereum by the price of Bitcoin. If this number is 0.07, it means one ETH costs 7% of one BTC. As of today, with ETH around $3.32K and BTC around $96.39K, this ratio is at relatively low historical levels.

But why does this matter? Because Bitcoin is often viewed as digital gold — a conservative choice in a crypto portfolio, while Ethereum is seen as a platform for innovation with decentralized applications and complex functionality. When the ratio rises, the market says: “We’re willing to take more risks.” When it falls, traders retreat to safety.

Historical Context: How the Ratio Has Changed

Since Ethereum’s launch in 2015, this ratio has experienced dramatic fluctuations. During the ICO boom in 2017 and the explosive growth of DeFi in 2020, the ratio reached impressive highs. In September 2022, right after Ethereum’s (Merge), when the network transitioned to Proof of Stake, it soared to 0.08563.

However, since then, the story has been different. By September 2024, the ratio had fallen to 0.03832, one of the lowest levels in recent years. At the same time, this coincides with a strange phenomenon: the overall crypto market capitalization is recovering, but ETH is lagging behind BTC.

What Drives the ETH/BTC Ratio

This ratio depends on many variables:

Technological developments — new scalable solutions on Ethereum or innovations in Bitcoin’s ecosystem can sharply change sentiment. For example, the growing popularity of Bitcoin staking strengthens BTC’s position relative to ETH.

Adoption levels — a surge in interest in DeFi protocols or tokenization of real assets (RWA) on Ethereum increases demand for ETH. When this isn’t happening, the ratio shifts toward Bitcoin.

Macroeconomic conditions — lower interest rates make riskier assets more attractive, raising the ratio. Aggressive rate hikes (as we saw in 2022-2023) cause investors to flock to Bitcoin.

Competition — the emergence of competing blockchains like Solana or Sui can divert capital from Ethereum, reducing the ratio.

Regulatory climate — approval of spot crypto ETFs and overall clarity in legislation boost trader confidence across the sector, but Ethereum often gets a bigger boost due to its functionality.

How to Read the ETH/BTC Chart Like a Pro

On the weekly chart, the ETH/BTC ratio shows an interesting picture: it has just bounced off a critical support zone at 0.035-0.04. These levels have real historical significance — they served as strong support in early 2021.

If the ratio holds above these levels, it could signal the start of a reversal with bullish prospects for Ethereum and the broader altcoin sector. However, impulsive trading decisions are not appropriate here. It’s essential to consider the broader context: what’s happening with BTC, macroeconomic news, and regulatory forecasts.

Connection to Altcoin Rallies: Myth or Reality

The situation here is more complex than it seems. Yes, the ETH/BTC ratio is often used as a warning indicator for altcoin rallies. The logic is simple: when Ethereum outperforms Bitcoin, it signals that the market is ready to accept risk, which is good for more speculative altcoins.

But historical data shows a more nuanced picture. Starting from 2022 to the present, the correlation between falling ETH/BTC and altcoin rallies has become less reliable than before. After the Terra and FTX collapses, the dynamics changed: Ethereum has become a safer haven for capital rather than a catalyst for explosive altcoin growth.

Conclusion: a low ETH/BTC ratio is a useful signal but not a guarantee. Altcoin prices are also influenced by fundamental indicators of specific projects, market sentiment, and macroeconomic conditions.

How to Use This in Your Trading

Mean reversion strategy — if the ratio has fallen significantly below its historical average, it may indicate ETH is undervalued. Investors anticipate a bounce and position themselves accordingly.

Day trading vs. long-term holding — short-term traders use technical indicators and frequently adjust positions, locking in profits on fluctuations. Long-term investors view the ratio as a tool for portfolio balancing — shifting assets into BTC during uncertainty and back into ETH when the market shows healthy signs of recovery.

Arbitrage — experienced traders look for price differences of the same pair across different exchanges. This requires precise execution and access to multiple platforms but can be quite profitable.

Risk Management: What You Must Not Miss

When trading based on the ETH/BTC ratio, it’s critical to:

• Set stop-loss orders to avoid catastrophic losses
• Properly size your positions — never risk more than you’re willing to lose
• Diversify your portfolio not only between ETH and BTC but also include other cryptocurrencies
• Conduct thorough market research before taking any action

The ETH/BTC ratio is a powerful tool in a trader’s arsenal, but it’s not a magic wand. To succeed, you need to combine its analysis with other indicators, fundamental research, and sound risk management.

At current levels (with ETH trading at -1.94% over 24 hours and BTC at -0.90%), the market is in an interesting position. Keep a close eye on how this ratio behaves in the coming weeks — it could give you valuable clues about the direction of the altcoin sector.