You see, whenever we want to cash out our Ethereum after reaching certain profit, we won't (or we can't) make a "ETH to USD" trade directly. In order to lower the spread, most of us will make a "ETH to BTC" then "BTC to USD" transactions. These two transactions often make investors have a suspicion that Bitcoin price has a significant effect in Ethereum trade.
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Imagine the following case, Assuming we have :
1. Two ETH token right now,
2. ETH/USD is priced at $50
2. "ETH/BTC" pair quote remains unchange at 0.05, and
3. Fall in BTC/USD price from $1000 to $900
this should focus us to have a depreciation when we are converting our Bitcoin to Cash.
If we convert ETH to USD directly, we have $100.
If we convert ETH to BTC, then BTC to USD, we have (2*0.05*900) = $90.
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We often observe that whenever there was an increase in ETH price, BTC didn't really follow (vice versa). And people will claim that their profit / loss is always affect by the price in BTC. Well I am here to prove that it doesn't.
Let use one of the most famous exchange, Bitfnex, as an example. I have extracted the data from 2017-04-01, til today.
BTC/USD ETH/USD ETH/BTC ETH_USD_worth Real_worth Difference
Date
2017-04-01 1084.05 50.5415 0.046533 100.193088 100.000000 -0.193088
2017-04-02 1109.65 48.8130 0.043948 96.766522 96.674031 -0.092492
2017-04-03 1154.65 42.9725 0.037343 85.188359 85.475841 0.287482
2017-04-04 1135.85 43.5665 0.038331 86.365900 86.311056 -0.054844
2017-04-05 1126.55 45.5315 0.040282 90.261302 89.961465 -0.299836Assuming we have 2 Ethereum tokens on 2017-04-01
ETH_USD worth: 2 Ethereum * ETH/USD
Real_worth : 2 Ethereum * ETH/BTC * BTC/USD
Difference : Real_worth - ETH_USD
If we plot the graph, its like this
Purple line: BTC/USD daily percentage change
Red line and blue line converge together most of the time, that's why you can't see a red line.
Finding
1. No matter how BTC/USD moves, it doesn't really affect anything. Our portfolio didn't suffer a loss, the difference between directly exchange and exchange through bitcoin is random.
2. Eventually its ETH/USD that affect your profit and loss, as ETH/BTC and BTC/USD will adjust accordingly.
As the market is quite efficient already. You should stop thinking that Bitcoin price movement will affect Ethereum price.
You may have a question: Isn't there certain correlation between BTC and ETH? They should sometimes move together right?
My answer: Not really, check out my previous analysis to understand why: [Edited] Using Python, Seaborn and Quandl to understand correlation in price and return among different crypto-currencies [WITH CODE!]