ETH/BTC — Why do traders watch this indicator like a crystal ball?

If you are serious about crypto trading, you have probably heard of the ETH/BTC ratio. It’s not just another charting tool — it’s a kind of compass that shows where market sentiment is heading. Let’s understand why this indicator attracts so much interest from professionals.

Quick Reference: The essentials of ETH/BTC

• The indicator shows how much Bitcoin is needed to buy one Ethereum
• Rising ratio = Ethereum is strengthening, altcoins are on the rise
• Falling ratio = Traders are fleeing to Bitcoin, seeking stability
• History shows: the ratio acts as a warning signal in about 70% of cases
• But relying solely on it is dangerous

What exactly do we see on the ETH/BTC chart?

Today, Ethereum is trading in the range of $3.33K (minus 0.40% over 24 hours), while Bitcoin holds at $95.87K (minus 0.81% over the day). This means the current ETH/BTC ratio is approximately 0.0347 — that is, one Ether equals about 3.5% of one Bitcoin.

Historically, this is not a record level. The maximum ratio reached 0.086 back in September 2022, right before Ethereum’s famous merge. The minimum was recorded in September 2024 at 0.038 — almost where we are now.

How does this work in practice?

The ETH/BTC ratio is calculated simply: Ethereum’s price divided by Bitcoin’s price. But the point isn’t in the math — it’s what it reveals about market psychology.

When the ratio increases — it’s a signal that investors believe in Ethereum’s potential and are willing to take risks. This usually coincides with hype around decentralized applications, DeFi, or other innovations in the Ethereum ecosystem. During such periods, altcoins accelerate because money flowing into Ethereum spills over into competitors like Solana or Sui.

When the ratio decreases — it indicates that investors are cautious. Bitcoin becomes the main asset again, often called “digital gold,” and traders shift capital here from riskier altcoins.

What makes this ratio jump back and forth?

Technological improvements and updates

Every major Ethereum network upgrade influences perception. When developers announce new features, scalability improvements, or fee reductions — the ratio chart usually trends upward. The situation with Bitcoin is similar: developments in Bitcoin staking or new functions on L2 networks can draw attention toward BTC.

Demand for decentralized applications

When a new trend blooms on Ethereum (remember the DeFi summer of 2021 or the wave of real-world asset tokenization RWA in 2024), demand for ETH surges because without Ethereum’s token, these applications can’t run. The result — the ratio increases.

Macroeconomic environment

It’s simple: if the Fed cuts rates and liquidity appears in the economy — investors flock to risky assets, including altcoins. Bitcoin, in such scenarios, grows but more slowly. Conversely, if rates rise and market nerves tighten — everyone rushes into Bitcoin, and the ratio falls.

Competition from other blockchains

When Solana or Sui start showing impressive results, some capital may shift away from Ethereum. This doesn’t necessarily directly reduce the ETH/BTC ratio but influences overall sentiment toward altcoins.

Regulatory changes

Positive news about cryptocurrency regulation (approval of spot crypto ETFs, clarity in legislation) usually lifts the entire altcoin market and the ETH/BTC ratio along with it.

Is the “low ratio = the start of an altcoin rally” legend true?

The answer is: mostly yes, but not always.

When we compare the ETH/BTC ratio chart with the overall crypto market capitalization (all altcoins combined), a very high correlation is visible. This was especially noticeable in 2021 — when the ratio soared, the altcoin market was booming. After the Terra and FTX crashes in 2022, the situation became more complicated, but the correlation still exists.

However, there are nuances. Since September 2022 (Ethereum merge), the ratio has been steadily declining from 0.08563 to the current 0.0347. But the altcoin market didn’t crash completely — it simply lost some momentum. This indicates that the indicator works, but it’s not a guarantee.

Conclusion: the ETH/BTC ratio is a useful tool, but not a magic wand. Fundamental indicators of individual projects, overall investor sentiment, and macroeconomics also influence the market.

How to use ETH/BTC in real trading?

Strategy 1: Mean reversion

The idea is that the ratio has a “normal” historical value, and when it deviates significantly in one direction or another — it will eventually revert. If the ratio drops substantially below the average — it’s a buy signal for ETH. If it rises much higher — profit-taking is possible.

Strategy 2: Portfolio diversification

Traders use the ratio to balance their portfolios. When ETH is strong — they take more altcoins aggressively, risking more. When the ratio falls — they shift capital into Bitcoin, playing more conservatively.

Strategy 3: Entry and exit points

Unusually low ratio = possibly buy ETH expecting a rebound. Unusually high = consider taking profits.

Strategy 4: Day trading vs long-term holding

Day traders catch short-term swings in the ratio using technical indicators. Long-term investors look at broader trends and periodically rebalance their portfolios.

Main risks

The ETH/BTC ratio is a handy tool but not a guarantee against losses. When trading based on this indicator, you should:

• Set a stop-loss to avoid losing everything
• Risk no more than 2-3% of your portfolio on a single trade
• Diversify — don’t hold only ETH and BTC
• Conduct your own analysis, don’t rely blindly on one indicator
• Keep an eye on news and macroeconomic background

Conclusion: a tool, but not magic

The ETH/BTC ratio is a powerful way to understand which way the crypto market wind is blowing. Rising ratio — investors believe in altcoins. Falling — everyone’s focus shifts away from Ethereum, and it’s time for Bitcoin.

History shows that the indicator often works, but not always. Currently, the ratio is at low levels (0.0347), which can be interpreted both as a buy signal for ETH on a rebound and as confirmation that Bitcoin is experiencing dominance. The conclusion depends on your strategy and analysis.

Remember: no indicator guarantees profit. Use the ETH/BTC ratio as an analytical tool, but always back it up with your own research, fundamental analysis of specific projects, and understanding of the current macroeconomic situation.