Ethereum Price Rises As Bitcoin Falls – Did ETH Steal BTC’s Thunder?
Ether (ETH) price gained 13.5% between January 10 and January 12, breaking above $2,650 for the first time since May 2022. The main reason for the rally is the approval of the Bitcoin (BTC) exchange-traded fund, but the leading cryptocurrency fell by 2% in the same period. Investors are now asking what it will take for Ether to maintain its current market capitalization of $322 billion.
Ether's price has gained 27% in the last 60 days, surpassing Bitcoin's 24% positive movement in the same period – a feat that is expected to destabilize the price as BTC acceptance opens up space for a whole new set of customers that the cryptocurrency has not been able to directly access. Additionally, Bloomberg ETF analysts have a 70% chance of approval for the Ethereum ETF in May, as opposed to a 95% chance for Bitcoin.
BlackRock, Fidelity, Greyscale, Van Eyck and other asset managers await the final US Securities and Exchange Commission (SEC) deadline on the May 23 Ethereum ETF decision, but with Bitcoin already paving the way, some analysts believe it may be the final answer. Come sooner than expected. For example, the SEC has average deadlines for some applicants at the end of January.
Ethereum's competitors have lost momentum
Given that the adoption of Bitcoin's spot ETF is known to have a negative price impact, one must conclude that Ether's bullishness is driven by other factors. For starters, Ethereum's direct competitors have faced a correction after making breakout rallies. BNB token (BNB) fell 2% in the 7 days to January 12, while Solana (SOL) fell 3% in the same period.
In the case of SOL, the bullish momentum faded after the most successful SPL token airdrops, including JITO, BONK and WIF, experienced a 40% and massive price correction. Additionally, most decentralized applications (DApps) activity gains seem to be concentrated in a few projects that had a recent token launch, which faded after each snapshot. As a result, investors' appetite for Solana's SOL token began to wane.
BNB experienced an impressive and unexpected 35.7% gain between December 17, 2023 and December 27, 2023, but the momentum of its growth was not matched by network activity. In the 7 days ending January 12, BNB Chain's active DApps addresses dropped by 61%, while the number of transactions dropped by 64%, according to Dapradar. By comparison, Ethereum experienced 2.2% less active addresses and 0.3% lower volumes during the same period.
Despite the depressed virtual token (NFT) markets relative to the 2021 peak, the Ethereum network remains the undisputed leader in value, including major clusters: CryptoPunks, Bored Ape Yacht Club, Pudgy Penguins and Azuki. Basically, people using Ethereum's decentralized finance (DeFi) applications and high NFT assets don't care about the average transaction fee of $6.30.
Ethereum crunch and DApps activity remain strong.
Ether's price also benefits from its 4.3% annual dividend yield and slightly negative payout ratio. About 24% of the total ETH supply is locked up as it participates in the network's validation process, raising investors' expectations for its value. In comparison, Solana's adjusted stock dividend yield is 0.8% at a higher SOL yield.
Related: Spot Bitcoin ETF Approved in US – What's Next
The Ethereum network is expected to undergo a hard fork, which marks a major development in its technological capabilities. Focused on increased data availability and reduced costs for bulk transactions, the first testnet implementation of the ‘Dencun' fork is scheduled for January 17. Other expected improvements include account abstraction, which will reduce transaction costs and enable secure social logins.
Ethereum's limited ability to scale and implement privacy solutions at the base layer has been a constant source of criticism. Therefore, it makes sense to smooth out the second layer access process in terms of user experience and cost. Therefore, Ether's rally above $2,600 has less to do with the ETF approval of the spot as the network remains dominant in the smart contract industry.
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.
