Ethereum Outperforms Bitcoin by 20%, But How Long Will ETH Hold $2.5K Support?
Ethereum's native token Ether (ETH) rallied 20% between January 8 and January 11 but struggled to hold the $2,600 level. The subsequent 3.5% correction to $2,560 on January 16 may have disappointed some bulls, but the price of Ether Bitcoin (BTC) is up 19.5% since January 8. Such gaps are extremely rare and last occurred in October 2022.
Ether investors demand that the level of $ 2,500 will hold, the most obvious drivers are not expected in the short term, namely the Ethereum spot exchange-traded fund (ETF) and the proposed Ethereum network upgrade. From a bullish point of view, these events give Ether the opportunity to unravel more than the rest of the cryptocurrency market, but they also pose a risk if it reverses or is delayed.
Ether often does not exceed Bitcoin by 15%
Ether prices exceeding Bitcoin by 15% or more in a single week is not uncommon, at least in the last couple of years. In addition to the high correlation between the two cryptocurrencies, 2023 saw Ethereum's total value locked (TVL) and frustration with persistently high gas fees, paving the way for competing blockchains. Meanwhile, Bitcoin has benefited from the pending spot ETF approval, especially after BlackRock joins the fray in June 2023.
In fact, the last example was 14 months ago when the price of Ether rose from $1,305 to $1,615 in the seven days leading up to October 29, 2022. After Bitcoin surged 17%, the gap was closed over the next 11 days as ETH fell below $1,100. On November 9, 2022
A past example should not serve as a guide to pricing, especially in 2011. November 2022 marked the collapse of the FTX exchange after reports of mismanagement of customer funds and an $8 billion shortfall. A counterexample includes the 31 days between July 13, 2022 and August 13, 2022, when the price of Ether exceeded Bitcoin by 63 percent.
In the year In the 31 days to August 13, 2022, ETH rallied from $1,080 to $1,990, and while it failed to break above $2,000, the divergence against Bitcoin's price continued into the next month. Basically, a very different type of price action than the short-term performance in October 2022. More importantly, the gap persists despite the cryptocurrency market capitalization correction, which is the opposite of what one would normally expect given Bitcoin's dominance.
It shows the strength of Ethereum network activity and the high demand for ETH
To understand what it takes for Ether to hold the $2,500 support, one must analyze the activity of the Ethereum network, including the measurement solutions. Decentralized applications (DApps) are at the heart of this smart contract-enabled blockchain, so decreasing usage by users and volumes means less demand for ETH.
Related: Spot Ethereum ETF Not Coming ‘Anytime Soon,' Mark Yusko Says
To assess network demand, one needs to analyze metrics related to DApp usage, as some projects including games, decentralized finance (DeFi) and invulnerable token marketplaces are not financially robust, making the Total Value Locked (TVL) metric irrelevant. Over the past 30 days, the top Ethereum decentralized applications (DApps) have dropped an average of 26% in active addresses.
In the last 30 days, Ethereum DApps have seen a 41% increase due to the additions of Uniswap, Balancer, ParaSwap and Aave. So, even if one excludes the movement in Ethereum rolls, the base layer has a 6 to 1 advantage over its biggest competitor, BNB Chain. That shows how the bears' criticism of Ethereum's high fees is overblown given its dominance in the DeFi industry.
In addition to strong activity on the chain, the price of Ether may benefit from the “Denkun” hard fork, which aims to increase data availability and reduce the costs of block transactions. The trial applications are expected to begin on January 17. In addition, Bloomberg ETF analysts hold a 70% chance of approval of the Ethereum ETF in May, which reinforces the bullish momentum and the $2,500 price support.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
