Comparing Bitcoin and Ether During the Coronavirus Pandemic

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Published : June 02nd, 2020
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Category : Market Analysis

You don’t need a crystal ball — or an economics degree — to notice the pandemic is having a historic impact on the stock market and commodities.

Gold initially went down (like all assets) in the mid-March meltdown, but is up 14% YTD. Oil bid negative, for the first time ever, as May futures traders dumped contracts to avoid taking delivery amid a lack of storage. It has since rebounded partially due to production cuts and the lifting of lockdowns. Orange juice is up over 26% YTD on adverse weather than impacted Brazil’s crop and increased consumer demand.

The most surprising shift, however, has been the pandemic’s impact on cryptocurrencies, such as Bitcoin and Ether. Here’s what you need to know about their past and what to keep in mind for the future of these cryptocurrencies especially if you decide to trade them.

History: Bitcoin vs Ether

Bitcoin and Ethereum are often compared — akin to the gold and silver of the cryptocurrency market. And like those two metals, Bitcoin and Ethereum have different purposes, functions, and histories.

Bitcoin was launched in 2009, several years before Ethereum saw the light of day. The way they differ the most is in their purpose. Bitcoin functions as a way to send and store digital money, similar to PayPal. Ethereum uses smart contracts to produce cryptocurrency tokens called Ether with a goal of using blockchain to replace third-party services that store data and transfer information on the internet.

Performance During Pandemic

So how are these two drastically different cryptos performing in the volatile COVID-19 market?

Before the pandemic, both were doing well — especially Ether, which by mid-February had doubled in value from where it was at the start of the year.

But by late February, both had come down in price, and then, on March 7th, they both declined even more — Ether back to where it was at the beginning of the year and Bitcoin even lower.

Bitcoin was trending in lockstep with the S&P 500, and values began to rally in late March, possibly due in part to Bitcoin’s upcoming halving. Indeed bitcoin surged past $10k before the halving, then dropped temporarily as holders took profits. It currently (May 29th, 2020) stands at $9,425.28.

On March 16 Ether hit a low of $107.90 before a partial recovery. It is currently at $220.50.

Both cryptocurrencies have experienced partial recoveries. Bitcoin is closer to its February peak than Ether is. But this is due to Ether’s much larger peak; year-to-date, Ether has performed better.

Bitcoin futures (BTCM20) on the Chicago Mercantile Exchange (CME) got a 5% bump earlier this month when billionaire hedge fund founder Paul Tudor Jones announced that he had invested 1-2% of his assets in the futures. He views bitcoin as a possible hedge against inflation and believes the cryptocurrency may play the same role that gold did in the 1970s.

Conclusion: Bitcoin Still King

Gemini cryptocurrency exchange co-founder Tyler Winklevoss has said that if Bitcoin is gold then Ether is oil.

With the prices of oil plunging and volatility in the gold market, it is hard to say those pat comparisons are still valid in today’s market.

Despite the major shifts in the commodities market, one thing is still clear. Despite the gains Ether has seen, it has not yet managed to push Bitcoin off its (real or imagined) pedestal. However, the pandemic is likely to inspire more market surprises before it’s over.

Editor’s Note: The Gold and orange juice price increases presented in this article are based on The Wall St. Journal’s tracking of continuous front-month futures contracts.

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Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and author of the book: 7 Steps to Win With Logic Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better. His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility. He has also been on the cover of AmalgaTrader Magazine, and featured in Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites.
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