A long time ago, many cryptocurrency bigwigs mentioned the ETH/BTC exchange rate to judge the strength of Ethereum relative to Bitcoin.
By analogy, this is actually a very good idea for continuous tracking and evaluation of targets.
Many investment and financial management books mention that in the long run, the rate of return for most retail investors buying individual stocks is not as good as that of investing in index funds. That is to say, you stare at the K-line every day, look around for financial reports, research reports and various financial news, and analyze and operate all at the end, but you still can't beat the index.
Of course, the above statement may be more applicable to the U.S. stock market. After all, the Shanghai Composite Index has been around 3,000 points for a long time, while the Nasdaq and S&P have continued to grow for a long time.
When we say whether a stock has outperformed the index, we usually compare the returns over a period of time. For example, the annualized return on buying Moutai may be 15%, while the annualized growth rate of the Shanghai Composite Index is 10%.
Referring to the idea of ETH/BTC, dividing the share price of Moutai by the Shanghai Composite Index will get a ratio. Then, by tracking this ratio over a long period of time, you can know the strength of Moutai’s share price relative to the Shanghai Composite Index. However, it seems that no software has this function.
Back to the cryptocurrency world, in addition to the ETH/BTC trading pair, there are many other altcoin-to-Bitcoin trading pairs, which can be searched directly on Tradeview. For example, if you want to search for SOL/BTC, just search for SOLBTC. The ratio of different cryptocurrencies to Bitcoin can be displayed intuitively in the chart.
If someone tells you that a certain coin is very strong, you can verify it simply and roughly by searching its historical trend relative to Bitcoin.
Many times, we intuitively feel whether a certain coin is strong or not. For example, when Bitcoin was at 70,000, ETH was at 3,000. When Bitcoin was at 90,000, ETH was still at 3,000. That’s why I never bought ETH.
For many coins that you don’t pay long-term attention to, the ups and downs of two or three days in the short term may be very eye-catching, making you mistakenly think that they are very strong. As long as you track the historical trend data of its ratio to Bitcoin, you can clearly see whether it is strong relative to Bitcoin, rather than judging by feeling alone.
Here are the exchange rates of several coins I selected with Bitcoin for a period of 1 year.
It can be seen that when Bitcoin halved in April, the exchange rates of several coins against Bitcoin were positive. Subsequently, except for BNB, the exchange rates of other coins against Bitcoin became negative, especially ETH and BOME, which not only had a long-term negative exchange rate against Bitcoin, but also continued to decline.
The SUI started to rebound in August, turned positive in September, and then the exchange rate soared. It adjusted back from October to early November, and has risen again in recent days.
The exchange rate of Dogecoin did not turn positive until early November, and it was only recently that Musk called for an order to push up the price.
Although I said in the title that this indicator is enough for cryptocurrency trading, in reality, you definitely cannot just look at this indicator. You also have to analyze individual coins from a macro and micro perspective, just like analyzing individual stocks. After all, different coins have different properties and uses, belong to different tracks, and have different future growth prospects.
The above indicator or analysis method may not necessarily help you choose strong coins, but it can at least help you avoid some coins with weak long-term trends. For novices in the cryptocurrency circle, it can help them avoid some pitfalls.
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