New investors don't really understand how the crpyto-exchange works when it comes to rise and fall in Ethereum. Here's a simple explanation with Python.

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   -0.299836

Assuming 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!]