Ethereum Falling Knife Warning: Will Ethereum Plunge Another 30% Against Bitcoin?

Ethereum’s native token, ether, has fallen to a multi-year low against bitcoin, prompting analysts to predict further losses in the coming weeks.

Falling Knife warns of further sell-off risk

On March 13, ETH/BTC, a currency pair that tracks Ethereum’s strength against Bitcoin, fell more than 1.50% to $0.022, its lowest level since May 2020.

ETH’s decline is part of a multi-year downtrend that began with its all-time high of $0.156 in June 2017. Since then, ETH has plummeted by more than 85%, highlighting Ethereum’s weakness against Bitcoin.

Meanwhile, on the two-week ETH/BTC chart, the relative strength index (RSI), a momentum indicator used to measure whether an asset is overbought or oversold, has fallen to an all-time low of 23.32.

ETH/BTC two-week price chart. Source: TradingView

Typically, when the RSI drops below 30, it signals oversold conditions that could lead to a price rebound.

However, in Ethereum’s case, the RSI continues to fall even after being oversold for two months, indicating that ETH’s downtrend is still accelerating rather than stabilizing.

Cryptocurrency analyst Alessandro Ottaviani described the situation as a “falling knife” scenario — a term used to describe an asset that is experiencing a rapid and sharp decline, which usually prevents buyers from stepping in too early.

A falling knife means that attempting to buy the asset at the lows could result in further losses if the downward trend continues.

For Ethereum to signal a potential reversal, traders will be watching for stabilization in the RSI and the reclaiming of key resistance levels. Ideally, this would start with a rebound from the 0.022 BTC level, which capped ETH/BTC’s downside attempts in December 2020, resulting in a 300% rally.

ETH/BTC weekly price chart. Source: TradingView

In the event of a rebound, the ETH/BTC pair can rally to the .382 Fibonacci Retracement level, around 0.038 BTC, which coincides with the 50-week exponential moving average (50-week EMA; red wave).

Until then, the technical outlook suggests that ETH/BTC may remain trapped in its downward knife trajectory, with the next potential downside target located at historical support levels in the 0.020-0.016 BTC range.

ETH/BTC two-week price chart. Source: TradingView

The low point of the range is about 30% below the current price level.

ETH/BTC fundamentals support bearish outlook

The prospect of further declines in Ethereum against Bitcoin stems from factors beyond technical analysis.

For example, Ethereum currently faces stiff competition from rival layer-one blockchain Solana.

VanEck noted that Solana’s decentralized trading volume surpassed Ethereum’s even amid a sharp drop in memecoin trading activity. Meanwhile, Solana’s trading volume has been rising consistently in recent months, while Ethereum’s trading volume has been falling.

Solana vs Ethereum DEX transaction volume comparison. Source: VanEck

Additionally, the launch of a spot Bitcoin ETF fundamentally changes the traditional cryptocurrency market cycle, which has historically favored Ethereum and other altcoins.

Historically, capital has shifted to altcoins after Bitcoin’s post-halving surge, sparking an “altcoin season” in which ETH and other assets outperformed BTC. However, the $129 billion inflows into Bitcoin ETFs in 2024 disrupted this cycle, draining liquidity from the broader altcoin market, including Ethereum.

Bitcoin Dominance Index weekly price chart. Source: TradingView

Another factor is the selling pressure that is unique to Ethereum.

The recent Bybit hack reportedly resulted in a large amount of ETH liquidations, with some of the value being laundered through decentralized platforms like Thorchain. This absorbed sell-off may still ripple through the market, depressing the relative value of ETH.