Here Are 3 Factors That Could Drive Bitcoin Higher Than Ethereum

Bitcoin rose last week on the back of declining inflation and an apparent improvement in macroeconomic conditions. According to a recent report, the cryptocurrency has been in an uptrend since the beginning of 2022 and seems poised to outperform other major cryptocurrencies.

At the time of this writing, Bitcoin (BTC) is trading at $22,800 for a 4% gain in the last 24 hours. Over the past seven days, the price of BTC has lost 2%, while other cryptocurrencies in the top 10 by market capitalization are showing more serious losses.

Bitcoin BTC BTCUSDT Chart 1
BTC price is moving up on the daily chart. Source: BTCUSDT TradingView

Ethereum Investors Show Caution Due to Bitcoin Rally

The number one cryptocurrency by market capitalization resumed its bullish momentum and surged above $22,000 as the US released the Consumer Price Index (CPI), a measure of inflation. The reading was hotter than expected for January, but not hot enough to deter investors from buying risky assets like BTC.

According to research and analytics firm Blofin, bitcoin has returned to its current levels as market participants “might overestimate the CPI.” The metric hints at a further increase in interest rates and tightening of monetary policy by the US Federal Reserve System (FRS).

However, participants in the cryptocurrency market and traditional financial markets do not believe and buy risky assets. These investors leading the current rally are likely betting that the Fed will change its hawkish approach and slow down its monetary policy.

According to Blofin, the recent release of the consumer price index has eliminated the uncertainty in the cryptocurrency market. Less uncertainty has resulted in additional gains for Bitcoin and the crypto market, as well as a drop in implied volatility (IV) in the options space.

Thus, the bullish momentum may continue until the next macro event when BTC dominates the sector. According to Blofin, in the case of Ethereum, investors took a different path:

Even though BTC block trades are characterized by positive sentiment as there are many calls being traded, ETH traders are more cautious. Many puts are trading, reflecting a bearish short-term outlook, which could be driven by uncertainty surrounding the SH (Shanghai) rating upgrade.

The upcoming SH upgrade will allow investors to unlock their ETH for the first time in over two years. This event, as often happens with significant Ethereum upgrades, could add to the downward pressure on the market, contributing to BTC’s ability to outperform it in the short term.

In addition, a separate report by QCP Capital notes increased regulatory pressure from authorities around the world. The US Securities and Exchange Commission (SEC) is leading the fight against a nascent industry targeting big companies and assets like BUSD.

The SEC refers to cryptocurrencies as securities in a broader and more public form. This new narrative creates uncertainty for all crypto investors except those who own bitcoin. This cryptocurrency is the only one that US regulators consider a commodity. KKP Capital marked:

With the “safety” threat resurfacing again, whether justified or not, ETHBTC’s subsequent drop to the lows of the year makes sense, as only BTC received a crucial “safety clearance” from them.

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