3 Driving Forces Behind The Ether-Bitcoin Exchange Rate

Summary On days when the tech-heavy Nasdaq 100 index rallies, ether tends to rise versus bitcoin. On days when the U.S. dollar is higher, ether tends to underperform versus bitcoin. Ether is both more volatile than bitcoin and highly correlated to bitcoin. By Erik Norland At A Glance Higher tech stocks tend to boost ETHBTC, while a higher USD tends to depress it Bitcoin supply is perfectly inelastic, which contributes to its high volatility Together, ether and bitcoin account for over 60% of the total value of the world's cryptocurrencies, but the exchange rate between the two has varied widely over time. So, what drives the Ether-Bitcoin exchange rate? The ETHBTC cross rate responds to many factors, but here are three of them. Technology Stocks On days when the tech-heavy Nasdaq 100 index rallies, ether tends to rise versus bitcoin. This may be because ether, which is the currency of the Ethereum smart contract network, has more practical applications in the technology space than bitcoin, which is mainly held as a store of value and a medium of exchange. U.S. Dollar On days when the U.S. dollar is higher, ether tends to underperform versus bitcoin. Bitcoin Supply While ether can be supplied up to 18 million coins per year, bitcoin supply is limited to a maximum of 21 million coins ever, of which about 19 million already exist. Every four years, the supply of new bitcoin drops in half. In the past, halvings have often been preceded by large run-ups in bitcoin prices and tremendous increases in the amount of revenue that bitcoin miners are paid for matching transactions. Ether is both more volatile than bitcoin and highly correlated to bitcoin. As such, when bitcoin rises or falls versus the U.S. dollar, ether often moves to an even greater degree. Original Post Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.