If you'd bought bitcoin or ether in May of 2021, you’d be down about 30% in US dollars on each right now – it would’ve made little difference whether you’d picked one or the other. But here’s why that could change fairly soon, with one massively outperforming versus the other.
This chart shows ether, priced in bitcoin – or the number of Satoshis (sats) you’d have to pay for one whole ether – with each red or green bar showing one week of price action. As you can see, aside from a few minor swings here and there, one ether has been worth about 7 million sats (or 0.07 bitcoins) for nearly two years (yellow dotted line). In other words, the volatility between bitcoin and ether has been really low lately: so low in fact, that the weekly Bollinger bands (white lines) are the closest they’ve ever been. I wrote a full explainer on Bollinger bands here, but in a nutshell, the bands get wider when there’s more volatility and narrower when there’s less. And typically, the closer they pinch together, the bigger the expansion when volatility returns. So according to the indicator, you could expect a hefty expansion at some point quite soon.
But here’s the tricky bit: while it’s easier to predict that volatility will come roaring back (it’s “mean reverting”, after all, so it tends to go back to its norm), it’s a lot harder to know which direction the price will move when it does. The price could break to the upside as the bands expand, which would have ether outpacing the OG crypto, or it could break to the downside, which would have bitcoin taking the reins for a while. So here's a sensible strategy you might consider: hedge your bets by owning both, instead of trying to pick the fastest horse.
All the daily investing news and insights you need in one subscription.Learn More
/3 • Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.