Why Ethereum’s Performance Is Competing With Bitcoin’s: Analysis

As the price of Bitcoin (BTC) hit a 19-month high this weekend, Ethereum (ETH) rose above $2200 for the first time since May 2022.

Chain analysts at CryptoQuant have identified three drivers behind crypto stars' performance over the past month.

Takes the result of ultrasound money

As shared by analyst MAC_D, ETH broke the key resistance/support level at $2000 last week, which marks the average price at which Ethereum users started to stake ETH on the network.

“It is an average price for investors looking to hold ETH for the long term,” the analyst wrote. “Most long-term investors have turned into profits, which could act as key support.”

Staking requires users to lock their ETH into the Ethereum network in order to receive a future yield that will allocate more ETH. Investors are thought to be at fault as ETH held in shares is generally considered non-tradable (although liquidity solutions such as Lido have helped remedy that limitation).

According to ultrasound.money, the reward for Ethereum shareholders is currently about 3.1% per year. There are now more than 34 million ETH in the Beacon deposit contract, which is over $75 billion.

Staking was introduced last year with a merger update, which significantly reduced the amount of new ETH circulation. This, combined with the network's transaction fee burning mechanism, has made the distribution of ETHs negative, earning it the nickname “ultrasound money”.

MAC_D noted that this price reduction event was “consolidated” during a period of increased network activity since last month.

“As a result, the total supply began to decline significantly, and after the news was announced, the total supply decreased by -82,861 ETH,” the analyst explained.

Ethereum ETF Hype

Much of the activity on the chain since last month has been driven by global investment giant BlackRock's It's on the excitement of the Ethereum Spot ETF, which showed on November 10th.

Although approval of such a product is not expected for some time, BlackRock's backing has helped spur market optimism that it is on the way. The change in opinion on the issue is reflected in the reduction of Grayscale Ethereum Trust, which decreased from 59% to 14.58% in December last year.

“This buying of trust products by institutional investors can be considered as one of the reasons that pushed ETH higher,” reports MAC_D.

ETH is now up 19.6% in the last month, while BTC is up 18.6%.